Full text of "Organized crime and banking : hearing before the Committee on Banking and Financial Services, House of Representatives, One Hundred Fourth Congress, second session, February 28, 1996"

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ft^ ORGANIZED CRIME AND BANKING

'- o

10^

HEARING

BEFORE THE

COMMITTEE ON BANKING AND
FINANCIAL SERVICES

HOUSE OP REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

SECOND SESSION

FEBRUARY 28, 1996

Printed for the use of the Committee on Banking and Financial Services

Serial No. 104-47

RECEIVED

SEP 1 1 ZCd

BOSfOW PUBLIC LIB

GOVERNMENT DOCUMENTS DEPA

jfl.M 2 3 1997

ORGANIZED CRIME AND BANKING

HEARING

BEFORE THE

COMMITTEE ON BANKING AND
FINANCIAL SERVICES

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

SECOND SESSION

FEBRUARY 28, 1996

Printed for the use of the Committee on Banking and Financial Services

Serial No. 104-47

U.S. GOVERNMENT PRINTING OFFICE
22-802 CC WASHINGTON : 1996

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-053608-1

HOUSE COMMITTEE ON BANKING AND FINANCIAL SERVICES

JAMES A. LEACH, Iowa, Chairman
BILL MCCOLLUM, Florida, Vice Chairman

MARGE ROUKEMA, New Jereey

DOUG BEREUTER, Nebraska

TOBY ROTH, Wisconsin

RICHARD H. BAKER, Louisiana

RICK LAZIO, New York

SPENCER BACHUS, Alabama

MICHAEL CASTLE, Delaware

PETER KING, New York

TOM CAMPBELL, California

EDWARD ROYCE, California

FRANK D. LUCAS, Oklahoma

JERRY WELLER, Illinois

J.D. HAYWORTH, Arizona

JACK METCALF, Washington

SONNY BONO, California

ROBERT NEY, Ohio

ROBERT L. EHRLICH, Maryland

BOB BARR, Georgia

DICK CHRYSLER. Michigan

FRANK CREMEANS, Ohio

JON FOX, Pennsylvania

FREDERICK HEINEMAN, North Carolina

STEVE STOCKMAN, Texas

FRANK LoBIONDO, New Jereey

J.C. WATTS. Oklahoma

SUE W. KELLY. New York

HENRY B. GONZALEZ, Texas
JOHN J. LaFALCE, New York
BRUCE F. VENTO, Minnesota
CHARLES E. SCHUMER, New York
BARNEY FRANK, Massachusetts
PAUL E. KANJORSKI, Pennsylvania
JOSEPH P. KENNEDY II, Massachusetts
FLOYD H. FLAKE, New York
MAXINE WATERS. California
BILL ORTON. Utah
CAROLYN B. MALONEY. New York
LUIS V. GUTIERREZ. Illinois
LUCILLE ROYBAL-ALLARD. California
THOMAS M. BARRETT. Wisconsin
NYDIA M. VELAZQUEZ. New York
ALBERT R. WYNN, Maryland
CLEO FIELDS, Louisiana
MELVIN WATT, North Carolina
MAURICE HINCHEY, New York
GARY ACKERMAN, New York
KEN BENTSEN, Texas
JESSE JACKSON, JR., Illinois
CYNTHIA McKINNEY, Georgia

BERNARD SANDERS, Vermont

(II)

CONTENTS

Page
Hearing held on:

February 28, 1996 1

Appendix:

February 28, 1996 83

WITNESSES
Wednesday, February 28, 1996

de Borchgrave, Amaud, Director, Global Organized Crime Project, Center

for Strategic and International Studies [CSIS] 69

Brody, Clifford L., President, Clifford L. Brody Associates, Inc 72

Brown, Richard A., District Attorney, Queens County, New York 50

Hecker, JavEtta Z., Associate Director for International Relations and Trade

Issues, General Accounting Office 7

Kelley, Hon. Edward W. Jr., Member, Board of Governors, Federal Reserve

System , 10

Memikoff, Boris F., Senior Vice F^resident, Wachovia Corp., on behalf of

the American Bankers Association 65

Morris, Stanley E., Director, Financial Crimes Enforcement Network 13

Owens, Charles L., Section Chief, Criminal Investigative Division, Federal

Bureau of Investigation 48

Rasor, Robert H., Deputy Assistant Director, U.S. Secret Service 43

Richard, Mark M., Deputy Assistant Attorney General, Criminal Division,

Department of Justice 54

Sims, Robert E., Senior Advisor, International Narcotics and Law Enforce-
ment Affairs, U.S. Department of State 16

Wankel, Harold D., Chief of Operations, Drug Enforcement Administration,

Department of Justice 16

APPENDDC

Prepared statements:

Leach, Hon. James A 84

Flake, Hon. Floyd H 87

Maloney, Hon. Carolyn B 90

Royce, Hon. Edward R 92

Watts, Hon. J.C 93

de Borchgrave, Amaud 301

Brody, Clifford L 307

Brown, Richard A 198

Hecker, JayEtta Z 94

Kelley, Hon. Edward W 110

Melnikoff, Boris F 218

Morris, Stanley E 123

Owens, Charles L 179

Rasor, Robert H 163

Richard, Marie M 207

Sims, Robert E 153

Wankel, Harold D 137

(HI)

Page

Additional Material SuBMnrED for the Record

Moloney, Hon. Carolyn B., copy of Indictment No.: 4355/95, The People of
the State of New York against Olushina Godwin Adekanbi et al 319

Vento, Hon. Bruce F., Pioneer Press, February 27, 1996, "Identity theft'
can be financial ruin" 317

ORGANIZED CRIME AND BANKING

WEDNESDAY, FEBRUARY 28, 1996

House of Representatives
Committee on Banking and Financial Services

Washington, DC.

The committee met, pursuant to notice, in room 2128, Rayburn
House Office Building, at 10:02 a.m., Hon. James A. Leach, [chair-
man of the committee] presiding.

Present: Chairman Leach, Representatives McCollum, Baker,
Lazio, Campbell, Royce, Metcalf, Chrysler, Cremeans, Heineman,
Watts, Kelly, Gonzalez, Vento, Flake, Waters, Orton, Maloney,
Roybal-Allard, Velazquez, Fields, Hinchey, Bentsen and Jackson.

Chairman Leach. The committee will proceed to the order of the
day, which relates to hearings on a very important subject. The
committee is meeting to review the threat organized criminal
groups pose to the international banking system.

Rapid changes in technology, globalization of finance, and politi-
cal problems m other countries nave all put stresses on the inter-
national financial system. While electronic and international bank-
ing have provided consumers with more choices and more efficient
markets, they have also made our financial institutions more vul-
nerable to fraudulent international schemes.

Organized crime groups, both in the United States and abroad,
are engaged in money laundering, counterfeiting of U.S. currency,
counterfeiting of fake financial documents, access device fraud, and
financial extortion on a massive scale.

Yesterday, the General Oversight and Investigation Subcommit-
tee, under the able leadership of Chairman Bachus, reviewed the
threat international coimterfeiting poses to the integrity of the U.S.
currency. Today, we will focus on other financial crimes.

As the use of paper currency decreases and gives way to credit
cards and electronic transfers, fraud associated with access devices
become more troublesome. This includes the fraudulent use of cred-
it cards or the fraudulent misuse of electronic banking systems.
Last year, this concern was made real when the Nation's largest
commercial bank, Citicorp, was electronically held up by inter-
national saboteurs. Jesse James may well have met his match. Ap-
proximately $12 million was transferred, with $400,000 withdrawn
via Citicorp cash management systems, and the unauthorized
transfers took place all over the globe, from Buenos Aires to the old
Russian capital of St. Petersburg to Israel.

Given that Citicorp alone moves about $500 billion per day, the
potential risk to the banking system is clearly staggering. Cur-
rently, access device fraud costs financial institutions an estimated

(1)

$4 billion annually. Nigerian criminal gp^oups, for instance, report-
edly account for more than $2.5 million in credit card fraud a
month in Dallas alone.

Another fraud being perpetrated by organized crime includes so-
called "desktop publishing" of fake financial documents, sometimes
referred to as "prime bank notes." Counterfeiting of corporate
checks, bonds, securities, and other real or fictitious negotiable in-
struments are being produced to defraud individuals, pension com-
panies, charities, and financial institutions.

Two years ago. Federal banking regulators issued a warning to
the banking industry on the rise in phony prime bank note activity.
Earlier this month, State banking regulators in the northeast is-
sued another warning to their State banks, indicating that the
threat continues.

Today, I will introduce legislation that will help law enforcement
agencies combat the financial crimes of counterfeiting, access de-
vice fraud, and producing bank notes. The legislation will make it
a Federal crime to pass off fake documents, such as prime bank
notes. It will allow Federal law enforcement agencies to seize the
equipment used in committing access device fraud, such as credit
card embossers. And the bill will increase the penalty for counter-
feiting to a maximum of 25 years imprisonment.

Probably the most pernicious crime affecting the banking system,
however, is money laundering, which, according to some inter-
national experts, now approaches half-a-trillion dollars a year.
Criminals have found that technological developments appear to
have made it easier to launder their illegal gains. For instance,
smugglers may no longer have to worry about getting cash-flow
valises from Customs when they can electronically put thousands
of dollars on stored-valued or Smart cards, no bigger than the aver-
age credit card.

With regard to money laundering, there is no shortage of domes-
tic laws. Since 1986, major anti-money laundering legislation has
been enacted in every Congress — ^from the Money Laundering Act
of 1986, which fully criminalized money laundering, to the Anti-
Drug Abuse Act of 1988, to the Depository Institution Money Laun-
dering Amendment Act in 1990, to the Annunzio-Wylie Anti-Money
Laundering Act of 1992, to the Money Laundering Suppression Act
of 1994.

But despite increased criminal penalties and reporting require-
ments, criminal syndicates still have found ways to legitimize the
proceeds from their illegal activities. Of special concern is the use
of offshore corporations and banks to skirt tougher U.S. laws. One
of the questions we'll be exploring today is what the U.S. Govern-
ment is doing to counter money laundering overseas.

Let me just end with that and ask unanimous consent to put the
rest of my statement in the record, and ask if any other members
would wish to speak at this time.

[The prepared statement of Mr. Leach can be found on page 84
in the appendix.]

Mr. Vento. Mr. Chairman, I commend you and subcommittee
chairman Bachus for your initiatives on these hearings this week.
The fact is that at the time that we're advocating and we see the
evolution of the electronic funds transfer and other types of innova-

tions in terms of the financial transactions that take place in our
society, it's a time when there is even greater risk to the consum-
ers.

Clearly, as is evidenced by votes in this committee earlier this
year, we intend to try to protect the consumers that are operating
and functioning in a responsible manner with regards to the elec-
tronic transactions, as has been advocated since the late 1970's in
terms of the Electronic Funds Transfer Act.

The fact is that the evolution of electronic funds transfer and
wire payments and so forth is moving in a direction that frequently
the banking and other laws have served us well and rules in the
past are being eclipsed by such actions. This, also, I think,
underlies the importance of sound regulation, not just with regards
to financial institutions, but to all financial intermediaries and the
need to have a seamless regulatory fashion in which there is co-
ordination, consistency and common sense that governs such
actions.

We have, of course, many aspects of our financial system, includ-
ing the insurance and the solvencv of institutions, and other factors
that obviously concern us. There nave recently been headlines that
are being made this week concerning the tremendous impact of
crime and drug use and financial transactions as a drain on our
total economy.

So I woula hope that we would pursue — and I understand from
the fact that you're introducing legislation that it is your intention
to continue to pursue a resolution and aggressive policy implemen-
tation with regards to some of these changes. But it's going to have
to be something that we continue to work on so it does not spin —
these policies and these reactions and actions do not spin out of
control in terms of our economy or the financial institutions which
we have relied on to, in fact, facilitate this process.

So I look forward to the hearing and to the continued work on
this enormously important aspect of our economy and our financial
future.

Thank you, Mr. Chairman.

Chairman Leach. Thank you, Mr. Vento. Yes, Mr. McCollum.

Mr. McCollum. Thank you very much, Mr. Chairman. As you
know, I wear two hats, vice chairman of this committee and also
chairman of the Crime Subcommittee over in Judiciary. Having
those two hats to wear, this is especially an important set of hear-
ings that we're embarking upon today. I think that the question of
what we do about crime in the world of finance is very much inter-
twined with the modem technology of today and the criminal mind
that has gone into every aspect of how he or she can manage to
take resources that belong to legitimate citizens and use them for
their benefit.

In many cases, this today is international in nature, not just na-
tional. I think that the threat of international crime probably is not
appreciated by most Americans to the degree that we should have
it appreciated.

The truth is that it's incredible, powerful in its reach. The secu-
rity of many countries is at stake, not to mention our own concern
over the integrity of our banking system. We have had testimony
before our subcommittee over in Judiciary on the issue of Russian

organized crime and understand from those hearings, from the FBI
and others, that today we have an incredible amount of extortion
that goes on in Russia that has spread to the United States, and
that affects directly the banks in Russia and, through that process,
also affects the international marketplace.

According to the National Strategy Information Center's 1993 re-
port on international organized crime, there are three distinctive
characteristics of these organizations in contrast with traditional
criminal enterprises. First, international criminal organizations are
designed to operate across international boundaries. The largest of
these groups, such as the Colombian cartels, are structured in a
fashion similar to any large multilayered global business.

Second, these organizations have established transnational links
to other criminal groups, such as terrorists and drug trafficking or-
ganizations, allowing them to cooperate in specialized activities,
such as money laundering and terrorist activities.

And, third, international criminal organizations are a significant
threat to the authority of civil government and the stability of
democratic financial, economic and legal institutions. Whereas tra-
ditional organized criminals, such as La Cosa Nostra, engaged in
a wide range of criminal activities, they have not normally pre-
sented a challenge to political order.

So I think that these hearings today are exceedingly important
and not just from the domestic standpoint, because having been an
author of much of the money laundering legislation or a co-author
of it that we are now dealing with, I'm interested in how that is
working and how many of our other domestic side issues are going
with respect to crimes in the financial services community. I'm very
gravely concerned about the international implications and how
that affects our banking system.

Thank you, Mr. Chairman.

Chairman Leach. Thank you, Mr. McCollum.

Mr. Vento. Mr. Chairman, I would ask unanimous consent to
place in the record an article on a report on "60 Minutes" this past
Sunday, in which a simple change of postal address resulted in a
rip-off in Rochester, Minnesota. A woman's address was changed
involuntarily to Brooklyn, New York. It just shows, I think, how
simple and how profound the changes can occur in terms of the na-
ture of our society. I would ask to put that article in the record.

Chairman Leach. Without objection, so ordered.

Mr. Vento. Thank you, Mr. Chairman.

[The information referred to can be found on page 317 in the
appendix.]

Chairman Leach. Yes, Mrs. Maloney.

Mrs. Maloney. Thank you, Mr. Chairman. First of all, I would
like to commend you on your legislative initiative and for holding
this hearing. The kinds of financial fraud we're going to discuss
today unfortunately affect every American. At the very least, each
one of us pays an increased price on everything from credit cards
to bank fees to make up for the dishonesty of those who don't play
by the rules, and some citizens pay a much higher price.

New York City's own Queens District Attorney, Richard Brown,
who will be testifying here later, has done a great deal in this area.
His hard work resulted in the indictment of eight Nigerian nation-

als charged with running a multi-milHon dollar nationwide coun-
terfeit credit card operation. The victims of this scheme had their
identities stolen, their accounts plundered, and their credit ratings
ruined. The scary thing is that this could happen to any of us, as
Mr. Vento just pointed out. By some law enforcement estimates,
this type of financial fraud alone is a $1.5 billion underground
business.

This is one of the reasons why my colleagues, Mr, Schumer and
Mr. Vento, and I oflTered an amendment to strike language from the
banking regulatory bill which would have both increased the maxi-
mum consumer liability from $50 to $100 on unauthorized ATM
transfers, which are very easy to take place, as well as transferred
the burden of proof to the customer on the issue of providing all
relevant information relating to an unauthorized use.

With some of the examples of illegal access to financial informa-
tion and even PIN numbers before us today, which we will be hear-
ing, I'm pleased for the American consumer that our amendment
passed this committee.

In the area of money laundering, I strongly supported the reduc-
tion in the number of currency transaction reports that banks must
file. It's the quality, not the quantity of information we gather that
is important. By blanketing every transaction over $10,000 with a
reporting requirement, resources were wasted by banks and the
government alike. It makes no sense to make banks file new paper-
work on every $10,000 transaction of, say, a nationally reputable
department store. Instead, know your customers' procedures, target
limited resources at the problem by spending the time to verify a
new account holder's business. A bank then has a standard of judg-
ment to identify what would be a suspiciously high transaction for
each particular customer.

In the near future, we are going to have a hearing on electronic
benefits transfer technology, which could move government bene-
fits, like social security and food stamps, from checks and coupons
to electronic benefit and debit accounts. Next week, we have yet
another in the series of hearings on the future of money. All these
emerging possibilities of government and business will be asking
consumers to place their trust in these new forms of currency. So
as we move into this new era, we need to maintain, not weaken
our consumer protections, find ways to make our new technology
both protect privacy and increase access to new services, and work
with business, regulatory and law enforcement to crack down hard
on those who seek to defraud American consumers and business.

Finally, it's important to remember that these financial crimes
are often vehicles for other criminal activities, whether tax evasion,
illegal drugs, or even terrorism. As the President said last year,
and I quote, "Criminal enterprises are moving vast sums of ill-
gotten gains through the international financial system with abso-
lute impunity. We must not allow them to wash the blood off
profits from the sale of drugs, from terror, or organized crime."

The President underlines the need for more international co-
operation of a type the Administration's financial crimes enforce-
ment network is pursuing in cooperation with private industry and
international regulators.

I hope this hearing today can provide us with some new insight
and ideas to combat criminal activity aimed at our financial insti-
tutions.

Thank you, again, Mr. Chairman, for your legislative initiative.

Chairman Leach. Thank you, Mrs. Maloney. Does anyone else
wish to make a statement on our side?

Mr. ROYCE. Yes, Mr. Chairman, if I could.

Chairman Leach. Mr. Royce.

Mr. Royce. Thank you, Mr. Chairman. In previous Congressional
hearings, we've heard that in Russia alone, organized crime encom-
passes some 1,500 state enterprises, some 500 joint ventures, and
550 banks. From news reports and research done by various orga-
nizations, such as the American Foreign Policy Council, we know
that the most rapid growth of organized crime in Russia is now
within the financial and banking structure and it is being coordi-
nated by former Soviet KGB operatives.

Indeed, according to party documents, in a 1992 Russian par-
liamentary investigation, the former Soviet First Chief Directorate,
the KGB's foreign intelligence arm, was instrumental in setting up
many banking institutions, which are now integrating themselves
into the western banking system. A parliamentary investigative
commission concluded that "The Politburo of the Communist Party
of the Soviet Union Central Committee made several secret resolu-
tions toward direct concealment in commercial structures of prop-
erty and monetary resources actually accumulated at the expense
of the nation. Based on this, at all levels of the Party hierarchy,
there was a mass founding of party banks, joint enterprises, and
joint stock companies in 1990 and 1991."

In fact, published reports in the Russian and western media say
that 75 to 80 percent of all joint ventures with western companies
founded between 1989 and 1991 involve officers of the KGB. With
this type of KGB involvement, the Russian Mafiya has been pro-
vided with organizational expertise, professional intelligence tech-
niques, and the manpower to carry out their illegal activities.

The professionalization of the Russian Mafiya poses new threats
to U.S. and world financial markets. White collar crimes, counter-
feiting, fraud, money laundering are the weapons of choice, with
the money then being used to expand operations into violent
crimes, such as drug smuggling, murder, extortion, and, most
alarmingly, trafficking in arms and nuclear weapons-grade pluto-
nium.

With ever-expanding increased computer access, with the new
encryption decoding techniques that new technologies bring, it is
hardly surprising to find that much organized crime today is being
carried out through the computer. Offshore operations are being in-
creasingly used to facilitate illegal activities of organizations not
only in Russia, but in Africa, the Middle East and South America.

Information and testimony from previous hearings has shown
that U.S. institutions, commercial accounts, municipalities, and
even our country's defense and civil systems are vulnerable.

Now, the overriding question, that I hope will be addressed by
each of our witnesses, remains what can we, as legislators, do to
help? What can we do to provide our institutions and citizens with
the capability to defend themselves against escalating cyber at-

tacks and punish those who would seek to conduct their criminal
activities through financial systems?

Thank you, Mr. Chairman.

Chairman Leach. Thank you, Mr. Royce. Mr. Fields, do you want
to be recognized?

Mr. Fields. Mr. Chairman, I would simply request unanimous
consent to have my statement entered into the record, as well as
any other Member who wishes to have his or her statement en-
tered into the record. I would like to commend you on this hearing
today and commend your fine group of panelists, because I feel that
this issue is certainly an issue that pours over into the illegal drug
activity that we have in our country. So I thank the gentleman.

Chairman Leach. Thank you, Mr. Fields. Without objection, so
ordered.

Mr. Chrysler or Mr. Heineman. No statements. Thank you. Mr.
Cremeans. No, fine.

Then we will turn to our panel. Let me introduce our panel, first.
Our first witness will be Ms. JayEtta Hecker, Associate Director for
International Trade, Finance and Competitiveness of the GAO; the
Honorable Edward W. Kelley, Jr., Governor of the Federal Reserve
Board; Mr. Stanley E. Morris, Director of the Financial Crimes En-
forcement Network; Mr. Harold D. Wankel, Chief of Operations of
the Drug Enforcement Administration; Robert Sims, Special Advi-
sor on International Criminal Justice to the Assistant Secretary on
International Narcotics and Law Enforcement Affairs of the De-
partment of State.

We welcome vou all. Before turning to Ms. Hecker, who is going
to testify out of order, we're beginning with the Congressional rep-
resentative first, which is somewhat unusual. I apologize to the
other members of the panel, but we thought it would set a frame-
work. In setting that framework, let me note that the GAO has
presented a very thoughtful report on this subject which was re-
quested by our distinguished colleague, Henry Gonzalez. I would
urge members of the committee to review this report because it is
a first class report.

Ms. Hecker.

STATEMENT OF JAYETTA HECKER, ASSOCIATE DIRECTOR
FOR INTERNATIONAL RELATIONS AND TRADE ISSUES,
GENERAL ACCOUNTING OFFICE

Ms. Hecker. Thank you, Mr. Chairman. We are very pleased to
be here today. As you said, our work is based on a request by Mr.
Gonzalez. I'm afraid, while we have briefed your staff, the work is
not actually complete and this is our first report based on that
work.

That request was to provide an overview or a framework of what
U.S. efforts were overseas. The methodology that we used was to
talk with foreign banks, foreign regulators, and law enforcement,
both U.S. and foreign, about their experiences with this problem
and their perceptions of the significance of the challenge.

My remarks today will cover five different areas. The first con-
cerns the distinct European approaches and their experience with
the "Know Your Customer" rule. The second is obstacles to U.S.
bank regulators' examinations of overseas branches. The third is is-

sues regarding coordination of U.S. law enforcement efforts over-
seas. The fourth is U.S. participation in diverse international
agreements to combat money laundering. And the final comment
will be on the significant challenges, mentioned by several already,
presented by wire transfers and correspondent banking.

As a background, though, before I begin, I think it might be use-
ful to share with you the clear consensus that we heard among the
more than 50 officials of banks and law enforcement and regulators
that we met with that money laundering and the infiltration of fi-
nancial institutions and the misuse of financial institutions is both
a widespread and challenging problem.

I can perhaps characterize this with a quote from one law en-
forcement official, a central unit, that said "No one in the world
can say they have control over money laundering. No one country
has come up with a solution to the problem." Thus, while many
countries share a very serious commitment to overcoming the prob-
lem and have devoted substantial resources to it, they admit they
remain vulnerable to being used for money laundering.

I think this is well supported by a State Department report that
Mr. Sims may cover. In the last report that was issued in March
1995, four of the five countries we visited, the United Kingdom,
Switzerland, Germany and Italy were listed in the highest category
of risk as vulnerable to money laundering. I might say that they
were in the same risk category as some countries long considered
real risks, such as the Cayman Islands, Colombia, Panama, Nige-
ria, and Mexico.

But to keep it in perspective, perhaps we should recognize that
this report itself highlights the special challenges in the United
States. In fact, the report notes, and this is a quote from the State
Department report, "The U.S. financial system continues to be ex-
ploited at levels probably not approached by any other country." So
clearly there's a consensus that it is a problem. It's a problem in
major European countries and not just small island countries who
are traditionally noted for this. And most notable of all, it remains
a very serious problem in our own country, despite very serious
and committed efforts to try to combat the problem.

Another precursor before I turn to the five points is to try to com-
ment on your focus today, that is on links to organized crime. I can
report that virtually all the law enforcement officials we talked
with commented on the growing problems associated with orga-
nized crime in Russia, Italy, Colombia, and, perhaps most signifi-
cantly, increased cooperation between them. For example, we heard
about the ongoing efforts of organized crime groups to cooperate on
different ways to split up the focus of organized crime activities in
different markets rather than having them compete with each
other. They are functioning, as cartels do, dividing up the market.

We didn't hear a lot that confirmed your specific focus here on
infiltration by these organized crime elements to control banking
institutions. Certainly, mere is acknowledgement that their money
is going into financial institutions, and that's the money laundering
aspect we have been focusing on, as distinct from your more signifi-
cant focus on the issue of infiltration.

The first comment I have today is about the European approach.
I think what we should note here is that the Europeans have a

longer and very serious commitment to the "Know Your Customer"
principle as the linchpin of their operation. And most countries,
who are very proud of this, believe they have a very well-focused
effort. They don't believe it's fully effective, but they contrast their
approach with the burdensome CTR reporting that has been
the traditional mainstay of the U.S. approach, and they think
they have a very focused responsibility put on bankers to make
judgments.

I think one interesting example that was shared, and this was
by an investment banker, actually a branch of a U.S. investment
bank, concerned the challenge of doing business with Russian cli-
ents. Some said it was so hopeless that they gave up. But this firm
said there's too much business there and there's got to be some le-
gitimate businesses, things being produced there, and we don't
want to refuse to deal with valid businessmen. What they actually
did was contract a $15,000 study to verify the business of the new
client. They reported that this approach isn't unusual before they
accept the business of a Russian client. They went to Russia,
looked at the business, verified the nature of the operations. They
note this approach is necessitated because in Russia, they simply
didn't have any forms they could rely on, such as SEC filings or
anything that they could consider valid, and that was the measure
they took of their due diligence to "Know Your Customer."

Now, I think an interesting contrast that we have is that we also
visited Hungary and Poland. There we found new units devoted to
the regulation of the banking sector and each country had recently
adopted, in full, the EU directive on money laundering, making it
a crime, and had appropriate laws in place. However, these officials
acknowledged that their implementation of the money-laundering
directive is far more limited. They acknowledge that officials in
their banks accept very limited identification to open accounts to
meet their obligation to "Know Your Customer." The clients basi-
cally fill out a card and give their name and address and passport
number and some documentation that they're a business. This is
an interesting contrast.

Chairman Leach. If I could interrupt iust for a second, Ms.
Hecker. We're going to have a large number of witnesses today,
and so we're trying to ask people to summarize in 5 or 6 minutes.
So if I could give you another minute or so, is that possible?

Ms. Hecker. Absolutely.

Chairman Leach. Fair enough.

Ms. Hecker. What I would say is that this approach is some-
thing we can learn from. The second issue of the bank regulators'
examination is that Federal regulators, and you'll hear this from
Governor Kelley, face special challenges overseas. They don't have
the same access. They work to overcome this, but in a lot of coun-
tries, they really cannot get in and do the same thorough examina-
tion. The Fed has some new guidelines and I think that may rep-
resent an important step forward.

In coordination of law enforcement, there were basic questions
raised about the multiplicity of agencies and concern about the lack
of coordination among them. We learned about an MOU that the
agencies themselves had put in place, but there's a lot of frustra-
tion among foreign law enforcement dealing with the multiplicity

of U.S. agencies. But there is tremendous respect worldwide and
among everyone we spoke with, that U.S. law enforcement is in the
lead, better understands the principles, as well as the leadership
of FinCEN, understanding the complex nature of the multiple
channels used to launder money, and that it takes a constant effort
to stay ahead of that. So there is real respect, but also frustration
in dealing with the multiple agencies we have involved.

The next point was our participation in international agree-
ments. The FATF is a very important initiative that you'll want to
learn more about, how successful it has been, what its operations
are. It basically sets a floor for countries to implement core regula-
tions and laws. They have an important process of peer review to
try to encourage countries to move forward. That's an important
initiative and I think Mr. Morris will outline a number of others.
The key issue there is how coordinated they are, whether they real-
ly add up to an effective strategy.

The final area is the special challenges presented by wire trans-
fers, and that is well known. I think the Fed is trying to work to
improve some of its efforts in that area. FinCEN is also active
worldwide in trying to educate and set up units and improve the
knowledge and focus on this. But it's recognized by almost all of
the people we spoke with as a weak link in the chain.

So that completes the overview and I apologize for going over the
time.

[The prepared statement of Ms. JayEtta Hecker can be found on
page 94 in the appendix.]

Chairman Leach. Thank you, Ms. Hecker. Governor Kelley, we
welcome you back to the committee. You have now become a par-
ticularly senior governor.

STATEMENT OF HON. EDWARD W. KELLEY, JR., MEMBER
BOARD OF GOVERNORS, FEDERAL RESERVE SYSTEM

Mr. Kelley. Thank you, sir. I will deliver a somewhat shortened
version of my testimony.

Chairman Leach. Maybe better, I should say, a higher percent-
age of the board governor.

Mr. Kelley. Yes. I hope that that percentage will go down soon.
I would request, sir, that my full statement be included in the
record.

Chairman Leach. Without objection, of course. Without objection,
all the statements will be put in the record.

Mr. Kelley. Thank you. Mr. Chairman, I am pleased to appear
before the committee on behalf of the Federal Reserve. The Board
places a high priority on providing assistance in deterring, detect-
ing, and reporting criminal activities directed at banking organiza-
tions, and we appreciate the committee's interest in this important
area. I have been asked to address the threat that criminal activity
poses to the banking system and I'd like to turn initially to that.

While all bank losses that result from criminal activities are
completely unacceptable, it is important to put the risks associated
with criminal activity in the proper context. As of September 30 of
1995, over 10,000 insured commercial banks in the United States
had aggregate assets of about $4.2 trillion, with capital of about

$350 billion and earnings in the first three quarters of about $37
billion.

In assessing the current financial strength of the U.S. banking
system and estimates of the extent of banks' losses resulting from
criminal misconduct, which include the banking industry's 1994 es-
timates of $800 million associated with check fraud and $700 mil-
lion associated with credit card fraud, we believe that losses from
criminal activities do not pose a systemic risk to the banking sys-
tem. Let me add, we also have no information that suggests that
any individual U.S. banking organization has been overtaken or
suDstantially threatened by criminal organizations or activities.

While we see no systemic threat to the banking system, we're ob-
viously concerned about the risks to the reputation and integrity of
our Nation's banks arising from criminal elements using the bank
system for their illicit purposes. These risks are best illustrated by
money laundering, estimates of which range between $300-$500
billion annually. There is no evidence that the flow of these funds
through U.S. banks, on their own, in the limited sense of the term,
pose a systemic risk.

However, if left unchecked, clearly, such use of our banking sys-
tem could undermine the reputation of banks or weaken the
public's confidence in banks as safe-keepers of their funds.

So what does the Fed do to combat this important threat? The
Federal Reserve has an important role in ensui'ing that criminal
activity does not pose a systemic threat and, also, in improving the
ability of banks to protect themselves from illicit activities. A
bank's best protection is its own policies and procedures designed
to identify and then reject potentially illegal or damaging trans-
actions. For this reason, the Federal Reserve and other regulators
have implemented various directives, controls and procedures de-
signed to detect unusual or suspicious transactions.

Examiners evaluate the effectiveness of a banking organization's
controls and procedures and have comprehensive training and in-
formation to assist them in identifying suspicious and unusual
transactions. But I do need to emphasize, however, that we do not
expect our examiners to act as police. The Federal Reserve is a
bank supervisory agency, not a criminal law enforcement authority.
We see our role as auxiliary to the legitimate law enforcement du-
ties of the criminal justice agencies.

The Board believes that as a safety and soundness matter, bank-
ing organizations should work to protect themselves from criminal
transactions through "Know Your Customer" policies and proce-
dures. Such procedures will allow an organization to identify their
customers and the transactions they conduct on a regular basis and
be alert for unusual or abnormal transactions.

One of the more significant components of this process is identi-
fication and reporting of suspicious and potentially criminal activi-
ties. To both reduce the reporting burden and increase the useful-
ness, the Federal Reserve has worked with the other bank super-
visory agencies and the Treasury to revise the criminal referral
process in several significant respects, and I will be happy to go
into that, if you'd like, later.

Over the years, the Federal Reserve has taken the initiative to
provide timely and useful information to banking organizations

with regard to ongoing criminal conduct. For example, the Federal
Reserve and the other banking supervisory agencies have issued
bulletins on such matters as prime bank fraud schemes and credit
card fraud. The recent policy of urging banks to monitor so called
"payable through" accounts is another example of our efforts in
that area.

The Federal Reserve does continue to work diligently to address
money laundering matters. Fed staff has provided training in anti-
money laundering procedures, both domestically and to foreign gov-
ernments. We chaired a working group that developed enhanced
Bank Secrecy Act examination procedures and, of course, we rou-
tinely coordinate with Federal law enforcement agencies.

The Fed is a founding member of the Bank Fraud Working
Group, which consists of representatives of 13 Federal law enforce-
ment and bank agencies, and the Federal Reserve is also an active
participant in the Financial Action Task Force, which was estab-
lished by the G— 7 group of countries and whose mission is educat-
ing countries around the world on anti-money laundering and fraud
prevention efforts.

Because of our work with bank supervisors and law enforcement
authorities, we recognize that crime is an international activity and
that criminals do make use of offshore corporations and banks.
These should be seen as two separate problems that we address in
different manners.

Because the Fed cannot control a sovereign nation's laws govern-
ing the establishment of corporations in its territories, we can only
address the activities of questionable offshore companies when they
seek to do business in the United States through banks we super-
vise, and here the principal tool is the "Know Your Customer"
policy.

No regulator or law enforcement agency can possibly monitor
every transaction. There were, for instance, 76 million Fedwire
transactions, involving $223 trillion, in 1995. However, we can and
routinely do measure the internal controls and risk management
systems implemented by banks to make certain that they are, in
fact, adhering to their own policies. With regard to foreign banks,
the Board, since it was given power by the Congress in 1991, care-
fully scrutinizes any foreign bank seeking to do business in the
United States. This includes making certain that the bank is sub-
ject to comprehensive consolidated supervision in its home country
and a review of its global anti-money laundering procedures. The
Fed is also working in a number of areas to improve bank super-
visory standards in other banking centers.

In conclusion, Mr. Chairman, while we do not see crime as pos-
ing a systemic threat to the banking system, we have and will con-
tinue to undertake extensive efforts to combat illegal activities
involving domestic and international banking organizations.

Because we have a vital interest in maintaining the reputation
and integrity of our banking system, and in aiding in the enforce-
ment of our Nation's laws, we will be continuing our cooperative ef-
forts with other bank supervisors and the criminal justice agencies
to develop and implement programs to better detect criminal mis-
conduct involving banks.

Again, sir, we appreciate the committee's interest in this most
important topic and I'll be happy to attempt to respond to any
questions you may have. Thank you.

[The prepared statement of Hon. Edward W. Kelley can be found
on page 110 in the appendix.!

Chairman Leach. Thank you. Governor Kelley. Mr. Morris.

STATEMENT OF STANLEY E. MORRIS, DIRECTOR, FINANCIAL
CRIMES ENFORCEMENT NETWORK

Mr. Morris. Thank you, Mr. Chairman, members of the commit-
tee. It's an honor to be here today and the subject of this hearing
is both a timely and an important one.

The Financial Crimes Enforcement Network, or FinCEN, is re-
sponsible for implementing the Treasury's policies to prevent and
detect money laundering. We provide analytic case support to many
Federal agencies, including the Secret Service, IRS' Criminal Inves-
tigative Division, the Customs Service, the Postal Inspection Serv-
ice, the FBI, and DEA. These are some of our most significant in-
vestigators in this area.

We also administer the Bank Secrecy Act, which is a key compo-
nent of our efforts to combat money laundering. As the chairman
said in his opening remarks, this committee nas given us very
strong and powerful money laundering tools over the years and we
are using these tools to build effective counter-money-laundering
policies, which is the subject of today's hearing.

We all know, of course, that the threat of organized crime, both
domestically and internationally, exists. This morning, I'd like to
look to the future. Transnational crime and money laundering are
going to continue to be a challenge to law enforcement agencies
around the world, and we must respond. I believe the United
States is taking important first steps toward doing just that. One
part of that response must be the recognition that Federal law en-
forcement cannot do the job alone. We must team up with our part-
ners, the State and local authorities, the bank supervisors, as well
as the financial services sector, and, most importantly, as Mr.
McCollum said, we must network globally.

The past decade has brought unprecedented changes to the
world's economy and the structures of government. These develop-
ments are also augmented by rapid advancements in technologies
that have revolutionized our methods of commerce, as well as our
capacity to communicate.

For example, a decade ago, daily trading in currencies was ap-
proaching the sum of $200 billion. Today, it is more than $1.25 tril-
lion a day, one hundred times the volume of world trade. Cross-bor-
der capital flows have exploded during that same period.

In this environment, finding illegal activity and dirty money is
ever more difficult. Clearly, there are new opportunities for crimi-
nals to exploit the revolutionary changes that are occurring in our
world's financial systems. And because of the evolving world envi-
ronment, governments are changing the way they look at criminal
activity, economic development, and foreign trade.

Traditionally, governments, ours and others, have compartmen-
talized their strategies for dealing with these subjects. Criminal ac-
tivity was the domain of law enforcement. Economic development

and banking were the mission of finance ministries. Foreign trade
was the realm of foreign affairs offices and trade ministries. The
private financial systems were just that — separate and apart from
the governments.

However, as commerce has globalized, so has crime. Con-
sequently, governments have come to recognize that they can no
longer compartmentalize their response to criminal, economic, and
trade issues. This panel and subsequent panels in today's hearing,
I think, are a clear recognition of that fact.

This is what we have been forced to do, for example, even within
my own organization, FinCEN. Just as we have moved to build
partnerships with the American banking industry, so, too, have we
recogfnized the need to build transnational partnerships through bi-
lateral and multilateral initiatives.

Let me outline five major initiatives which illustrate how the
United States is trying to rise to the challenge of dramatic change
in the globalized world economy. As Congresswoman Maloney
pointed out in her opening remarks, at the 50th anniversary of the
United Nations, just 4 months ago. President Clinton outlined his
initiatives to combat transnational crime, including drug traffick-
ing, arms smuggling and terrorism. The President is assigning a
very high priority to negotiating agreements with those nations
who are out of compliance with international standards. FinCEN is
coordinating this initiative in close cooperation with the law en-
forcement agencies of Treasury and Justice, as well as with the
bank regulatory agencies and the intelligence community.

Just a couple of months ago. Secretary Rubin hosted a con-
ference, a meeting in Buenos Aires, on the first and second of De-
cember. The purpose of the conference was to fulfill the directives
set in the Summit of the Americas in Miami to provide effective de-
tection, prevention and investigation of money laundering.

The heads of delegation in attendance represented the leaders of
Interior, Justice, finance ministers, and central banks. The con-
ference produced an accord, which marks a vital first step in do-
mestic and international efforts, to track the proceeds of illicit ac-
tivities and impede criminals from developing the wealth from
their activities that gives them the power to undermine the fragile
democracies in our hemisphere.

As Ms. Hecker said, another multinational effort is the Financial
Action Task Force, which was established at the direction of the
Gr-7 nations in 1989. It is composed of 26 countries, plus the EU
and the Gulf Cooperation Council. Its purpose is to set a standard
in the world which all countries should attempt to meet. We have
worked diligently to increase the global awareness of money laun-
dering through that program.

This year, the United States is serving as the chairman of the
Financial Action Task Force, examining some of the issues and try-
ing to come up with new recommendations that this committee will
be discussing today. We are having some effect. Even small coun-
tries, such as Slovenia and the Czech Republic, have enacted or
have just recently enacted anti-money-laundering legislation.

In the area of technology, policing a society in the throws of fun-
damental change means putting change at the top of the agenda.
The computer lab and squad room may seem worlds apart, but

they are not. The changing financial world creates vast opportuni-
ties for criminals. Technology is a critical part of this trend.

Any individual, using a relatively inexpensive computer and a
common telephone line, can move enormous amounts of data
around the world at nearly the speed of light and hide data in ways
which even a skilled professional cannot detect. New cyberpayment
systems are coming on-line, some designed by brilliant entre-
preneurs who know technology, but who do not even come from the
financial world. We will need partnerships with these industries.

This committee has provided real leadership in that area and
many of us were at hearings here just a few months ago discussing
that subiect.

Last September, FinCEN hosted a day-long colloquium at NYU's
School of Law to discuss the implications of these technologies, and
a partnership effort. In attendance were bank regulators, credit
card companies, CEOs, both from the United States and Europe, as
well as academics and prosecutors who shared their views. They
tried to bridge the chasm, the professional different viewpoints that
exist in this area.

Another example of partnership is the suspicious activity report-
ing system that was mentioned by Mr. Kelley. Three weeks ago, we
turned the switch, implementing the new national system which
will be administered by FinCEN, but in a unique partnership with
all of our Federal law enforcement agencies, the Federal Reserve
Board, who played a major role in developing this, and the other
bank regulatory agencies.

In the context of technology, of keeping up with the criminals,
this new system will significantly improve our ability to detect
criminal financial activity, to assure that information about that
activity gets to the proper law enforcement and regulatory authori-
ties, and to gain a broader strategic understanding of the national
and global implications of attempts by international organized
crime to subvert our banking system.

One result of the efforts I nave described above has been that
criminals can no longer rely on traditional means of laundering
their money. Traditional avenues are being closed off. And because
of efforts like the Fineincial Action Task Force and Summit of the
Americas and the initiatives by our law enforcement agencies,
criminals must take greater risks to exploit the financial systems.
This makes them more vulnerable to detection.

The Customs Service indicates that currency smuggling out of
the country is up. Many criminal organizations are desperate to
move their cash out of the country because it is too risky to launder
it here. Presently, the safest way for criminals to repatriate crimi-
nal proceeds to Colombia is to sell their U.S. dollars to Colombian
businesses. This procedure of hiding their money is complicated, in-
volves many steps, is expensive, and makes them vulnerable to de-
tection. According to reports, the cost of laundering in criminal or-
ganizations has risen from 6 percent in the mid-1980's to as much
as 20 percent today. We are affecting organized crime's day-to-day
laundering operations, but much more, of course, needs to be done.

The new era is altering the roles of law enforcement, central
banks, and financial institutions. Technology makes the globali-
zation process irreversible. Change is our challenge. Secretary

Rubin has been leading the Treasury campaign to break out of the
molds to meet that challenge. Transnational organized crime is al-
ready exploiting change with the fading of national boundaries. To-
gether we must send a clear message that money laundering will
not be tolerated in the world economy.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Stanley Morris can be found on
page 123 in the appendix.]

Chairman Leach. Thank you, Mr. Morris. Mr. Wankel.

STATEMENT OF HAROLD D. WANKEL, CHIEF OF OPERATIONS,
DRUG ENFORCEMENT AGENCY

Mr, Wankel. Thank you, Mr. Chairman and members of the
committee. I am pleased to be here today. I'm going to digress from
my prepared remarks, because my esteemed colleague, Mr. Morris,
has said much of what I needed to say, I think, anyway. In the in-
terest of time, let me just make a few comments here. You have
the prepared statement of the Drug Enforcement Administration.

This is truly a global problem of serious magnitude, as, Mr.
Chairman, you and members of your committee have spoken to as
we opened this session this morning. It will continue to grow and
will be a problem. I would submit to you that the monies and the
attendant corruption attached to this business of the money laun-
dering and the international crime, transnational crime, does have
the potential to destabilize or at least negatively impact banking,
to destabilize economies, and to destabilize governments.

It is going to be critical that we all work, within this government
and with other governments, to ensure that we have, in addition
to a stated commitment, a demonstrated commitment on the part
of our allies and our partners to move into the enactment of legisla-
tion, the implementation of legislation, and move forward on this
program. This will require training on our part, obviously, and,
also, entering into mutual legal assistance treaties.

I would mention that these adversaries, whether they are inter-
national drug criminals that we see in the Cali Mafia or the Rus-
sian organized crime elements, are very worthy adversaries. They
study law enforcement, they study banking, they study the broker-
age nouses, how they do businesses, they know the systems, they
know the laws, and they know how to approach, attack, and exploit
vulnerabilities. We have to remove those and we have to do it, I
think, with all due fervor. I think it's very appropriate that you're
having this session today.

In tne interest of time, I will cease my remarks at this point and
I will be happy to answer questions.

[The prepared statement of Mr. Harold D. Wankel can be found
on page 137 in the appendix.]

Chairman Leach. Thank you very much, Mr. Wankel. Mr. Sims.

STATEMENT OF ROBERT E. SIMS, SENIOR ADVISOR, INTER-
NATIONAL NARCOTICS AND LAW ENFORCEMENT AFFAIRS,
U.S. DEPARTMENT OF STATE

Mr. Sims. Thank you very much, Mr. Chairman. I, too, have sub-
mitted a prepared statement, but I'd like to hit some of the high-
lights in light of what the other panelists have said. It's also a

privilege for the Department of State to appear before the commit-
tee today to discuss what, in the Department's view, is a critically
important national security problem, and that is the impact of or-
ganized crime on banking and financial services.

Mr. Chairman, the Department is deeply concerned about this
threat basically for two reasons; first, the direct threat to the phys-
ical safety and economic well being of Americans at home and
abroad. Money laundering is the life blood of narcotics trafficking
and organized crime and fuels criminal activity in the United
States, including violence.

Second, Mr. Chairman, transnational organized crime threatens
America's national security and foreign policy interests in a num-
ber of regions of the world, undermining legitimate economies and
threatening emerging democracies. President Clinton and Secretary
Christopher have placed the battle against transnational organized
crime at the forefront of U.S. foreign policy agenda and have com-
mitted the diplomatic community to work closely with law enforce-
ment, intelligence, and other relevant agencies to find effective and
innovative responses to this problem.

If you'll permit me, a personal note, Mr. Chairman. I'm a small
example of that commitment myself. I am not a career foreign serv-
ice officer, but came to State after serving 5^2 years as an Assist-
ant U.S. Attorney in the District of Marjdand. During my time in
the office, we certainly saw a large influx of organized crime
groups. The Cali Cartel, Nigerian heroin organizations, Asian
gangs, among others. These groups move into Maryland, often with
violent and tragic results.

Mr. Chairman, if a State like Maryland or the United States, in
general, with its strong experienced, law enforcement and judicial
institutions, can feel the negative effects of transnational organized
crimes, countries without these advantages suffer damage that is
often much more severe. The economic and political power of Rus-
sian organized crime groups, the Colombian cartels, Mexican drug
traffickers, Nigerian organizations, and Asian drug lords could not
be ignored by the United States, even if they had no direct U.S.
law enforcement interest or impact on that interest. These organi-
zations can, through corruption, intimidation or violence, greatly
inhibit legitimate business activity, erode public confidence, and
undermine democratic institutions in the countries in which they
operate. This, in turn, directly undermines U.S. national security.

The State Department can and must play an important role in
our effort to combat global money laundering and the threat of
transnational organized crime. There are three areas of the Depart-
ment's responsibilities I'd like to focus briefly on today, the first
being international training and technical assistance; the second,
foreign policy and national security initiatives; and, finally, over-
seas coordination.

Mr. Chairman, the United States is fortunate enough to have the
best trained and most knowledgeable law enforcement officers in
the world, and vou'll be hearing from these agencies over the
course of this nearing. However, as you've heard, in facing
transnational crime, this is only part of the battle. We must work
with effective counterparts overseas in order to accomplish our
goals. Unfortunately, our law enforcement officers are often called

upon to work with law enforcement officials in other countries that
do not benefit from the same level of training and have not devel-
oped the same expertise we have. This is especially a problem in
areas such as money laundering and financial crime, which can in-
volve sophisticated laundering techniques or complex frauds that
require equally sophisticated investigative work.

Mr. Chairman, the Department is working to develop or help de-
velop these effective partners overseas by offering training, law en-
forcement training through our foreign assistance accounts. In un-
dertaking these international efforts, the Department has two basic
goals. The first is to build institutional capability overseas and
allow these foreign countries to place themselves in a better posi-
tion to work cooperatively with us. The second is to foster close
working relationships between our law enforcement authorities and
those in other countries. We do this recognizing that resources are
limited, so we must work to reduce unnecessary overlap. It is most
important that these programs be administered with our broader
foreign policy interests in mind.

To accomplish these various objectives, the Department is work-
ing closely with our Federal law enforcement agencies to establish
priorities and implement effective and coordinated training pro-
grams. Grood examples of that are efforts in the former Soviet
Union and Central Europe, that I describe more fully in our pre-
pared statement.

Another area of the Department's involvement, Mr. Chairman, is
foreign policy and national security initiatives. There, you have
heard a number of initiatives, the President's money laundering
initiative. Treasury's work in the Summit of the Americas, and the
Financial Action Task Force, and State is involved heavily in all of
those areas in cooperation with Treasury, Justice, and other
agencies.

We also have ongoing discussions with the G— 7 partners and the
Russian Government, trying to develop a range of recommenda-
tions for improved international cooperation against money laun-
dering and financial crimes, and organized crime in general.

I would also like to mention one of the other initiatives that
President Clinton announced during his speech before the U.N.
General Assembly, and that was the use of the International Emer-
gency Economic Powers Act against the Cali Cartel. lEEPA, which
is administered, as you know, by Treasury's Office of Foreign Asset
Control, allowed the President to freeze assets of the designated
Cali Cartel leaders, their associates and front companies in the
United States, but, more importantly, prohibits U.S. persons from
doing business with these individuals and entities.

This gfreatly restricts the ability of these front companies to con-
duct business as usual in or with the United States. Surprisingly,
published reports in Colombia also suggest that Colombian busi-
nesses, including financial institutions, have been emboldened bv
the President's action and have been refusing to do business witn
these cartel front companies, as well.

Mr. Chairman, the use of the lEEPA statute, as well as the
President's money laundering initiative are the type of innovative
responses to organized crime we need and, indeed, we're working

on an interagency basis, as required by the President, to determine
whether we can use lEEPA to target other criminal organizations.

The final area I'd like to touch on, Mr. Chairman, is the question
of overseas coordination. Here, I would note that both the Sec-
retary of State and the U.S. Chief of Mission have statutory re-
sponsibilities for coordinating our activities abroad, activities for all
U.S. Government personnel abroad. As the personal representative
of the President and country, the role of the Chief of Mission is es-
pecially important because he or she is charged by the President
and statutorily responsible for direction, coordination, and super-
vision of all U.S. Government personnel in the country, except cer-
tain military personnel.

The Chief of Mission must, therefore, play an important role in
our fight against transnational organized crime. We believe, Mr.
Chairman, that the overseas law enforcement activity and the
placement of our law enforcement agents overseas is in the vital
interest of the United States and, indeed, our missions overseas are
the forward bases for protecting and advancing U.S. national inter-
ests, including our law enforcement interests.

Mr. Chairman, my purpose for mentioning these responsibilities
is I fear the Department's ability to support these important law
enforcement functions is jeopardized as mission resources are re-
duced. We currently have some 1,600 law enforcement personnel
overseas and virtually all of these agencies are seeking to expand
their presence. Unfortunately, Chiefs of Mission are increasingly
considering such issues as cost and resource availability when
making decisions to enhance our law enforcement presence, even
where they agree that that enhanced presence would be desirable.

I would, therefore, urge members of the committee, when looking
at the issues of law enforcement activities overseas, not to forget
the State Department's responsibilities and the resources it needs
to support these activities.

As with other transnational crimes, Mr. Chairman, there is no
simple solution to the threat of global money laundering and finan-
cial crime and I believe we have to look at each of the areas I have
discussed here today, as well as the other issues touched on by the
panel, as part of a comprehensive response.

The Department of State looks forward to working with the law
enforcement and intelligence communities and with the Congress
to combat this global threat.

Thank you.

[The prepared statement of Mr. Robert E. Sims can be found on
page 153 in the appendix.]

Chairman Leach. Thank you verv much. Before proceeding, I
would like to take a moment to introduce a distinguished guest. We
have with us today a former Attorney General of the United States
and former Secretary of State, Mr. Bill Rogers. You're welcome, sir.
I might mention, I think, that the overlap of those two depart-
ments, as Mr. Sims says, is significant.

I just have a couple of questions of the panel before turning to
others. First, it appears that overnight, the magnitude of this
whole problem has grown. All of these issues, in one form or
another, have been existent for many years, but suddenly the

magnitude is upsurged and appears to, in fact, continue to be
upsurging.

Mr. Sims mentioned the issues of resources, but when we think
of the issue of budgeting, whatever the changes in Congress, and,
frankly, I think they're more modest than the current debate that
is underway between our two parties, but basically Congresses
start out with the prior year's spending levels and then they tilt
them slightly up or down depending on priorities and prejudices.

But it strikes me that whereas the United States may be well
ahead of any other country in the world in our sophistication, that
if we're talking about a half-trillion dollar problem, and that num-
ber has been thrown out and I don't know if people want to contest
it or not, that is a problem of a magnitude that makes it a creature
of a very different dimension than might have been the case 3
years ago or 13 years ago.

And as we look at the resources of the government, and it's one
of the reasons I'm disappointed that the CIA turned down our invi-
tation to speak, some of the language that has been used today —
Mr. Wankel talked about that this has the capacity to destabilize
institutions and governments. Mr. Sims indicates it has a potential
to imdercut democracies. All of a sudden, you're talking about fun-
damental root problems.

And then when we look at where we allocate our resources in the
government, are we allocating them to deal with this magnitude or
future magnitude problem? It strikes me, in particular, we all
called for interagency approaches. I have been one that has want-
ed, frankly, to bring the intelligence services more directly into
institutional accountability, because I think they have more
resources, in many ways, at least abroad, than any other set of
institutions.

So what I would like to ask all of you is as we look at this, aren't
we looking at a new creature? If we're looking at a new creature,
don't we have to give substantially upgraded attention? And if we
give substantially upgraded attention, where should those re-
sources be applied?

Is this another case that the Department of State has to put
some question marks about its declining resource base? Is it a case
for the Treasury and the Secret Service? Is it a case for the Federal
Reserve and some of its activities? How would you respond to that
question?

Mr. Morris. Let me try. As at least one member of the panel
knows here, I've been in the government a long time, over a quar-
ter of a century, and this issue is driven by the reality of political
attention first, and then the issue of mobilizing resources.

I am not aware of any statement about the urgency and impor-
tance of this problem by a President of the United States for the
time that I have been in government. The most significant and
powerful statement was made by the President at the United Na-
tions in October. It is also very significant that the Secretary of
State has spoken out in a major address at the Kennedy School.

The Secretary of Treasury felt it significantly important to spend
a weekend in Buenos Aires at the summit of the Americas Ministe-
rial Conference trying to hammer out an issue on money launder-

ing, because exactly, as you said, the ability of organized crime to
launder its money means that they can develop economic power.

There is no free enterprise svstem that can operate if some peo-
ple have no cost or low cost of capital. You drive out honest busi-
nessmen, particularly in countries that don't have a long tradition
of free enterprise and economic power.

This is a very serious matter. I don't think the question right
now is how much money should we be throwing at the problem. I
think that we are in the process of looking at it more intelligently
and then we will bring the resources to bear, I believe. I know
that's the view of the Secretary and the Attorney General, both of
whom I have had an opportunity to speak to on this subject.

But I think that the urgency and importance of it and the value
of this hearing itself, is the kind of political leadership that will
drive those of us to bring the resources to bear to deal with it. I
don't think we have had tnat level of attention before.

Mr. Wankel. I agree 100 percent with your lead-in question
here. We need only look at the cocaine business as it impacts this
coiuitry. Since the mid-1980's, let's say, the organized cocaine busi-
ness in the United States is controlled entirely outside the confines
of the United States. It's from Colombia, now Mexico increasin^lv.
That's where the order of business is drawn, that's where the CEOs
of these cartels sit, if I can use that statement.

Organized drug crime and increasingly organized crime is truly
a national security threat to the United States. We only need look
at President Zedillo in Mexico and what is said in Russia as far as
the national security threat that it poses to those countries. That
very much makes it directly a threat to the United States.

I think, then, that there needs to be, in some sense, a reordering
of prioritization of assets. I agree very much with Mr. Sims. In this
day and age, as we are tiring to increasingly work with allies, force
allies to come to the table in the foreign arena, to work in a real
meaningful sense on these efforts, we have to have the ability and
the resources, both personnel and, to some degree, additional mon-
ies probably to be able to make that come about.

Chairman Leach. Mr. Kelley.

Mr. Kelley. Mr. Chairman, from the standpoint, and it's a rath-
er limited standpoint in the broad context that we're discussing
here, from the standpoint of the banking system, I agree with Mr.
Morris. It's not so much a matter of anv absence of necessary re-
sources. We have been provided with those in the regulatory re-
gimes, and there are a number of various pieces of legislation of
recent years, all of which have helped.

I would like to mention, however, that the biggest help, from our
standpoint, was enactment in the Congress several years ago of the
Foreign Bank Supervision Enhancement Act, what we call FBSEA,
which was and is a tremendous tool for the Federal regulatory
agencies in this area. It did involve the dedication of a substantial
amount of additional resources on the part of the Federal Reserve
and other agencies to comply with the requirements of that act,
and we have been supported in that by the Congress and I think
that it is proving to be quite effective.

I do agree with Mr. Morris that this is going to be an unending
problem of trying to work smarter instead of simply harder in the

sense of pouring an enormous amount of resources into it. Obvi-
ously, we would support any resources that are needed and the
Congress has been very good about supporting that, as well.

But I think it's primarily a matter of just keeping very good peo-
ple involved and keeping our eye on the ball and trying to stay up
with this evolving threat as it changes over time.

Chairman Leach. Thank you, Mr. Kelley. Yes, Mr. Sims.

Mr. Sims. Thank you, Mr. Chairman. I agree with what each of
the panelists has said, because I think that there is a difference be-
tween the idea of sort of throwing money or just simply increasing
budgets as a way to address a problem and doing that sort of
smartly, sort of targeting resources.

The reason I raised the question with respect to the Department
is that I think that there are links that sometimes are not drawn
when we're looking at these problems, and we've talked about sort
of compartmentalization. On the one hand, we have, at this hear-
ing, a clear indication that we're facing a significant national secu-
rity threat that we've got to respond to, and some of that is sort
of things that we can do internally, unilaterally, and the govern-
ment is committed and the Administration is committed to doing
that.

But there are also things that we need to do internationally, in-
cluding being on the ground to be able to affect what happens over-
seas. When those links aren't drawn, if we are then looking at the
Department's resources — and, in fact, they are being rolled back, so
the embassies are having more limited operations, consulates are
closing and the like. That's where I see the need to consider this
holistically, because we're facing a serious national security
problem.

I can give you a real small example of that. I note that Mr. Mor-
ris is familiar with the situation in the Seychelles. We learned
some months ago that the Seychelles — as a very small example —
the Seychelles has passed a law that for a $10 million investment,
you are given essentially immunity from prosecution for anything
but a drug crime or a violent crime committed in the Seychelles.
We were extraordinarily concerned about that, even with a small
country. It's an extremely bad precedent.

We talked to our Africa Bureau. We wanted to impact and get
that turned around and found out the embassy is closing there.
Within weeks of our attempt to get in to have this discussion, the
embassy was closing. There was very limited assistance by the
United States. In fact, I think there was a tracking station, a mili-
tary operation that was also closing.

So in essence, as we were trying to get in to sort of stop what
we viewed as a very serious, thougri small, in the larger scheme of
things, development, we, in fact, find our resources are going the
opposite direction. That's what I mean by trying to draw these link-
ages. If we want to be able to impact the situation on the gn'oiir'd
overseas, we've got to be there.

Chairman Leach. Thank you very much, Mr. Sims. Mr. Vento.

Mr. Vento. Thank you, Mr. Chairman. It doesn't sound like put-
ting the Marines in charge is going to work, as some have advo-
cated. Mr. Chairman, I think that very often this testimony evolves
into the sort of cash transaction or illegal laundering, but I think

that's a very serious problem, but I think that the issue here, from
our standpoint, is really that it's being facilitated now on an elec-
tronic basis and the ability to invade the system.

Part of this leads to the question that you were pointing out, I
don't know how closely I was listening, Mr. Chairman, but — and I
think Mr. Morris was pointing to this — that this can really undo
the free enterprise or the ability of a nation to move into a more
democratic or free market type of economy, as we see in central Eu-
rope and in other places, and, in fact, of course, it's not unknown.

You really wonder, if you list a country like India or Colombia,
what the effect would be in terms of the entire ability of that econ-
omy to function in the context of the type of financial transactions
that take place between it and other nations, whether it's Britain
or France or the United States.

I would like to yield to Mr. Bentsen, because he has to go, Mr.
Chairman, on my time.

Mr. Bentsen. I thank the gentleman for yielding and I'll just
t£ike a second. First, I do have to leave to go to a meeting with a
major institution from Houston, but I wanted to welcome Governor
Kelley, who is a fellow Houstonian. Actually, I grew up with his
kids some time ago. I had an economics professor in graduate
school who said that he held the best job — this was a strict
monetarist, who said all you had to do was go in in the morning,
check the money supply, and play tennis the rest of the day. But
I know Mr. Kelley does a lot more than that.

I do have two questions, for the record, for Mr. Kelley and for
the others.

Chairman Leach. Excuse me, if the gentleman will yield.

Mr. Bentsen. I will yield to the chairman.

Chairman Leach. He must also, on a regular basis, see if the
gold is at Fort Knox.

Mr. Bentsen. I stand corrected by the chairman on that. The
first is there are — ^it's my understanding there are six or seven
Russian banking companies that are of some stature that have
come about that are — and some that should make it over time, and
they are having difficulty in establishing agencies in the United
States.

And I would just ask, for the record, because I am going to have
to leave, whether or not there is a problem related to the fraud and
criminal activity that is a result of their problems or if there are
other issues. I'd just appreciate that, if you could get back to me
and also for the record.

[Governor Kelley subsequently submitted the following informa-
tion for the record:]

Applications are currently pending from Promstroybank of Russia, Imkombank
Bank, and Rossiyskiy Kredit Bank. All are seeking to establish representative of-
fices in New York. The applications must be evaluated under the standards set forth
in the Foreign Bank Supervision Enhancement Act [FBSEA], including the extent
to which the applicant foreign bank is subject to comprehensive consolidated super-
vision, the financial and managerial resources of the applicant, and whether the ap-
plicant has provided the Board with adequate assurances that it will have access
to information necessary to determine and enforce compliance with U.S. law. Fed-
eral Reserve staff are in the process of completing the records on these applications.
At that point, the Board will decide whether the standards for opening representa-
tive offices in the United States have been met as specified in the FBSEA.

Mr. Bentsen. The second question relates to legislation that this
committee adopted earlier this year, and that has to do with the
regulatory reform legislation and changing the structure of the
audit committee for boards of bank companies. Current law, as I
understand it, requires that audit committees must retain a major-
ity — the majority of the committee must be outside directors. The
legislation that this committee adopted would repeal that and
allow insiders to control the majority of the audit committee.

I'm just interested, again, for the record, in your comments on
whether or not you see this as opening another avenue where in-
siders could be compromised and problems could occur, criminal ac-
tivity could occur as a result of that.

I appreciate the gentleman yielding and I yield back my time.

[Governor Kelley subsequently submitted for the record the Fed-
eral Reserve Board's views of tne independent audit provisions of
H.R. 1858, which amend section 36 of the Federal Deposit Insur-
ance Act:]

As drafted, H.R. 1858 exempts well-capitalized and well-managed institutions
from all the requirements of section 36 except the requirement for an independent
audit. The purpose of section 36 is to identify management problems before they
harm the bank s condition; an exemption is inconsistent with this purpose. In par-
ticular, the requirement in section 36(gXl) of an independent audit committee is im-
portant because such committees can play a pivotal role in corporate governance
and provide an additional layer of protection against possible malfeasance.

Mr. Vento. Thank you. I think that they will answer for the
record, Mr. Chairman, and if there is time permitting, you might
want to comment. But my question really related — or one of them
was — the witness from the GAO, Ms. Hecker, you mentioned that
there are 40 measures or recommendations by the Financial Action
Task Force. Did you get any sense of how many of those had been
implemented or what the status of some of those were?

Ms. Hecker. The primary mechanism of the FATF to assess
progress is the mutual evaluations. We didn't personally review
them although we had reports that people were very satisfied with
this process. Basically, these reports are not disclosed. They're kept
private. So I can't accurately summarize their findings for you.

Mr. Vento. Let me ask our witnesses if they can give us a sense
of what the status is. I'm interested to know how many prosecu-
tions you had internationally. Can you get into Buenos Aires if you
have someone that is doing something or into St. Petersburg if
somebody is doing this? Are they actually going to be prosecuted?
Because if not, if there are going to be these delays, I mean, that
is basically going to continue to foster the type of electronic funds
transfer problem that really undermines the entire validity and re-
liability of the financial institutions and our various relationships.

Mr. Morris wants to answer.

Mr. Morris. Yes. Let me at least try. First of all, it's important
to recognize that money laundering itself was criminalized in the
United States in 1986 and as the chairman pointed out in his open-
ing remarks, the Congress has given us a number of new tools.

When the Financisu Action Task Force was created in 1990, we
established 40 recommendations and then went through a process,
which we call mutual evaluation, in which experts from other coun-
tries go in and assess the country's performance against those rec-
ommendations. Great progfress has been made in all of the coun-

tries of the Financial Action Task Force in putting in place the
laws and the mechanisms to deter and, if unsuccessful in deterring,
to prosecute and convict money launderers.

However, as the committee is all too aware, the laws in them-
selves are not self-enforcing. New units have been established,
much like FinCEN, which receive suspicious reports based on
knowledge of customers in Holland, France, England, Belgium, Ar-
gentina, and Australia.

So they're beginning to have the mechanisms, as well, to take in-
formation from the banks. TTie bank reporting is getting better.
They're beginning to identify and make cases. The next phase —
we're doing two Siings. One, which is an issue you brought up, is
that we're now in the process of changing some of the initial 40 rec-
ommendations, toughening them up, and, in one case, adding one
that forces governments to look at new payment systems, new elec-
tronic technologies that go into new payment systems, so that
every country covered by the FATF will have to do an affirmative
examination of the vulnerabilities there.

We are also going through the mutual evaluation now. The first
starts with France in a couple of weeks, and looking at not just the
fact that the laws are in place, because they are in place, they can
show those to you, now we need to look at whether or not, in fact,
they're being carried out. That is, of course, the big question.

But I think in fairness to the process, given the number of coun-
tries and the different cultures and nature, we've made a lot of
progress.

Let me make just one other quick point here, because I think it's
very important to note that in the world today, there is a different
attitude about dirty money. I was in Russia for a week as a part
of a Financial Task Force training program, along with colleagues
from State, Justice, and the Federal Reserve, and we met with a
lot of banks and people from the Central Bank and the Finance
Ministry and all, and we raised the question that they should set
up a system to report suspicious reports of illegal money coming
into the bank.

There was almost unanimous puzzlement as to why anybody
would not take dirty money into the bank. That has cnanged. It
has changed in Russia. It has clearly changed throughout the
Americas. There is now an understanding that dirty money drives
out clean money, that, as Mr. Wankel and Mr. Sims have said, that
raises serious security concerns.

So the international convention attitude, I think, has changed
here significantly, as well. But, finally, the proof is in the pudding
and we're examining now not just whether the laws are in place,
but whether they are, in fact, being implemented.

Mr. Vento. Mr. Chairman, my time has expired, but I'd be most
interested to know of our technical ability in the United States in
terms of providing the types of software programs and checks to try
to keep up with or keep ahead of those that are trying to break the
system down. I think that is where we need to go to ensure the re-
liability and the integrity of the electronic funds transfer system.

Obviously, the whole focus seems to me to be on a laimdering of
money that comes from illicit activities, but the concern here is
who is getting debited and who is getting credited. An electronic

system is paperless. And while the issue in terms of illegal trans-
actions is important, I think the other — Mr. Kelley commented on
the amount of credit card fraud. I'd be interested in knowing on —
we could never get an answer on the electronic funds transfer
fraud or what the problem was.

What are the changes for consumers? What do we have to do?
How can we stop that particular system, besides just saying we're
going to give you all the liability and walk away from it. Thank
you, Mr. Chairman.

Chairman Leach. Thank you very much, Mr. Vento. Mr. McCol-
lum.

Mr. McCoLLUM. Thank you, Mr. Chairman. Mr. Kelley, the Jan-
uary 22 issue of the New York magazine carries a very provocative
story, "The Money Plane." It says that every day, the Russian mob
gets a shipment of up to a billion dollars in fresh $100 bills. The
money, flown out of JFK, comes straight from the U.S. Federal
Reserve.

Now, inside, they are a little more explicit and talk about a bank
in New York, called Republic National Bank of New York, and
$100 million that they have documented leaving a particular time
of day and going to Russia and so on and so forth.

What I'm curious about is — I'm sure you are aware of this article.
To what degree is this article accurate? Is what is being done in
any way against the law? If you've looked into that. What authority
do you have, does the Federal Reserve have to stop anything that
may be improper that is reflected in the passage of this kind of
money? I don't doubt some of it must be going to the mob, but I've
heard that story from other sources, not this particular one.

What can you tell me about, using this at least as a jumping off
point, what's going on at the Fed in terms of this issue?

Mr. Kelley. I'd be happy to, sir. Using that article as a jumping
off point, let me give you a general configuration of how this entire
business works. There is, of course, a demand around the world for
U.S. currency and that demand is particularly strong in those na-
tions where the population has had problems in the past with their
currency, or perhaps with hyperinflation and so forth, and they see
the dollar as a haven of value.

The Federal Reserve meets the demand for currency, both do-
mestically and overseas, by selling currency to U.S. chartered
banks, who, in turn, resell it and put it out into circulation. That
happens routinely through every bank in the United States domes-
tically. There are relatively few banks, and the one that you men-
tioned is probably the major single one, who are in the business of
meeting the demand for U.S. currency overseas.

Now, Russia is one of the very largest areas where there is a de-
mand for U.S. currency and there isn't any doubt but that a certain
amount, and I don't know how much, of that currency does indeed
go to illicit activity.

But to put it in context, this is a very large and rapidly expand-
ing economy and there is an enormous amount of perfectly legiti-
mate activity that goes on there, certainly including many U.S.
firms who are doing perfectly legitimate things to help develop that
economy.

Also, the dollar is the medium of choice for savings of the aver-
age Russian household. It's been estimated that up to 70 percent
of urban households and 40 percent of rural households in Russia
own some dollars which constitute their family savings, and they
keep them buried in the backyard against a rainy day. So there is
a tremendous amount of legitimate activity that requires dollars
and there is a tremendous amount of savings by the average Rus-
sian family of American dollars.

Now, the Russian banking system is a brand new system. They
had to start from scratch. When the cold war ended, they did not
have a banking system that was at all suitable to operate in a free
enterprise or market economy. And there are a lot of good people
who are working very hard to try to establish a good, sound, legiti-
mate banking system in Russia.

Mr. McCoLLUM, I know you want to answer further and I don't
want to cut you off, but before the yellow light goes off, I want to
make sure one other point is answered as you're getting into Rus-
sia right now. To what degree does the Fed have knowledge of
crime infiltration, organized crime infiltration in the Russian bank-
ing system? I know I've heard from the FBI concerns they have
over this issue and Fd like to know, as you describe and finish your
comments here, what you know about it.

To what degpree are these banks corrupt and do you have powers
sufficient to deal with the degree of corruption that may come back
our way from that source? Please, but I just wanted to be sure I
got that in, if you can answer.

Mr. Kelley. Yes. If criminal activity comes back our way and is
reintroduced in some manner or an attempt is made to reintroduce
it into the U.S. banking system, then we do have a great deal of
power and a great deal of infi-astructure in place to deal with that.

We certainly do not have the capability of involving ourselves in
the internal affairs of the nation of Russia.

Mr. McCoLLUM. But what do you know about that?

Mr. Kelley. Not a great deal as to what happens specifically in
Russia. United States banks sell a relatively small number of Rus-
sian banks American currency. There are on the order of about
2,000 commercial banks in Russia now, of which about 800, as I
understand it, are authorized to engage in foreign exchange type
activities.

The bank that you mentioned sells currency to a very small sub-
set of that and they represent that that's a very carefully selected
subset. We and the other Federal regulatory agencies supervise
American banks and they are held to very high standards when
they operate overseas and they are examined against those stand-
ards.

We are not the examiner for Republic Bank specifically, but I'm
very sure that their activities are carefully scrutinized and held to
the highest standards. But they, I am sure, in turn, are limited in
their ability to influence what goes on with U.S. dollars after they
have sold them to their legitimate customers in Russia.

Chairman Leach. Thank you, Mr. McCollum. Ms. Roybal-Allard.

Ms. Roybal-Allard. Thank you, Mr. Chairman. It is my under-
standing that the anti-money-laundering regulations currently
apply primarily to banks and that many countries have not estab-

lished similar guidelines for non-bank financial institutions, even
though there seems to be a growing problem in that area.

How effective are the current anti-laundering regulations on non-
bank entities which are involved in financial services and what is
being done to strengthen the weak links among these non-bank fi-
nancial institutions?

Mr. Morris. You're quite correct that our regulatory scheme,
particularly at the Federal level, is much more effective as it re-
lates to depository institutions where we have supervisory over-
sight from the Federal Reserve and the OCC and the FDIC and the
OTS.

As it relates to non-bank financial institutions, we, in the United
States, and this is a problem elsewhere in the world, do not have
the same effective regulatory oversight. The Congress has given us
authority to place those entities within the gambit of the same
kinds of*^ rules. It is important to note, as we define them, right at
the beginning, however, that that is quite a challenge,

I got back late last night from Las Vegas, where we're dealing
with the casino industry and trying to establish anti-money laun-
dering mechanisms there, which has a fairly mature casino busi-
ness. Obviously, the kind of regulatory scheme you put in for casi-
nos is different than you would put into, say, for broker-dealers,
who we had a meeting with a couple of weeks ago, trying to design
a suspicion reporting system and a "Know Your Customer" policy
related to that. That is different, again, when you deal with check
cashers or money transmitters.

What we're trying to do is focus on the places where they seem
to be the most significant, i know the chairman has spent some
time in another context here dealing with the issues of insurance.
We hear from some of our colleagues in Europe, in the United
Kingdom and in France, that they see insurance being increasingly
used as a device to essentially camouflage the source of illegal
money. We, of course, have no Federal regulatory mechanisms to
deal in that area and we are looking very closely at what they're
doing.

DEA and Customs have made major cases against currency ex-
change houses. There have been currency exchange houses along
the border that have been used for money laundering.

This is a very difficult area. One requirement under the Money
Laundering Suppression Act is to set up a registration just to iden-
tify them and then begin to, in various categories, deal with them.
The more effective we get with banking, we push the problem into
new forms of technology and it's something we need to pay more
attention to.

Ms. Roybal-Allard. My second and last question is that the
U.S. Government has been working to establisn alliances with the
private sector experts in order to share information, because it's so
difficult to keep up with all the changes. Have the alliances be-
tween the private sector experts on financial crime and the Federal
regulators been effective in helping regulators and enforcement of-
ficials keep up with this constant technological change?

Mr. Morris. I will make a quick comment. We created, some
years ago, what we call the Bank Secrecy Act Advisory Group and
it's made up of both non-bank financial institutions, representa-

tives of the casino industry, and then large representation from
banking, both the large banks. Citibank, Bank of America, as well
as smaller community banks.

It has been the single wisest thing that we have done. It is clear
that if we do not have, in the money laundering area, an effective
partnership and that they understand what we're doing and that
our regulations are sensible, we are going to fail. They really know
the money business better than any of us in the Federal Govern-
ment.

As good citizens and with effective oversight from the regulators,
I think we've made very good progress. The whole suspicious re-
porting system that I mentioned in my opening remarks and also
that Mr. Kelley mentioned, will not work unless the banks know
what it is we're looking for. Our colleagues at the Secret Service
and FBI and the like are building those kinds of relationships, as
well.

Mr. Kelley. Let me make three points as it would regard the
banking system. First of all, we are working very hard to improve
and expand and strengthen this basic approacn of "Know Your
Customer," and that is the heart of the matter.

Second, in the area of the ever-more sophisticated electronic
means that are available to move money, the private sector, who
is at risk, is spending an enormous amount of attention and re-
sources on countermeasures to make sure that their internal sys-
tems cannot be breached. This is going to be a job that is going to
go on forever, because there are very, very clever criminals out
there and they, I'm sure, will always be able to come up with new
schemes. We're just going to have to try to stay ahead of it.

Which leads me to the last point. I think, as Mr. Morris suggests,
that one of the most important relatively new developments in this
whole field has been the establishment and evolution of informa-
tion sharing networks among government agencies and private sec-
tor participants, which shares information very efficiently and in
great detail.

So when some new scheme shows up, information about that is
very rapidly and very effectively disseminated and counter-
measures can be very quickly put into place. I think that has been
very effective, as well.

Ms. Roybal-Allard. Thank you.

Chairman Leach. Thank you, Ms. Roybal-Allard. Mr. Campbell,
welcome.

Mr. Campbell. Thank you, Mr. Chairman. It's a pleasure to be
on the committee and to call you Mr. Chairman. I have two ques-
tions, but I'll preface it by a comment of welcome to my good
friend, Stan Morris, with whom I had the honor to serve in the
Justice Department and note to the chairman and my colleagues
what a distinguished public servant he is in many different
capacities.

The questions I have are two, first to Governor Kelley and then
to Mr. Sims. So I'll state them both and then the time is yours to
divide. They are on different subjects. For Governor Kelley, I rep-
resent a Silicon Valley high tech area and indeed the headquarters
of Internet and we're very interested in the cyber banks and a nee-

essary component of any effective cyber bank is the electronic sig-
nature, the iincounterfeitable, hopefully, electronic signature,

I'm interested in what guidelines, if any, the Federal Reserve
has — and this is an information question. It's been 3 years since
I've been in Congress and I don't know what the answer is. So it's
not as though I'm setting something up.

And to Mr. Sims, the question is I grant your point and I wonder
if the Secretary of State would support an earmark for law enforce-
ment functions in the foreign ops budget. I sit on the International
Relations Committee and that would be one way of addressing the
problem. Traditionally, the Secretary has opposed an earmark and
I wonder if you might enlighten me on that. Governor Kelley.

Mr. Kelley. Shall I start? The entire area of electronic money
is developing very rapidly. There are a very wide variety of dif-
ferent schemes, if you will, as to how to get this thing going and
how to establish new payment systems and so forth. It is, as yet,
so much in its infancy and so much in flux that it's very difficult
to tell what the configuration of this new industry, new system or
group of systems is going to really look like.

We don't understand the configuration of how they work because
none of them are really in place and functioning yet on an oper-
ational standpoint. It's also very difficult to tell what the mag-
nitude of the funds that will move over these systems will turn out
to be and it's very difficult to make an estimate of how rapidly the
growth is going to occur.

So we are studying this whole matter very intensively. We are
extremely interested in it. But we still are very much in the begin-
ning phases of understanding it because the whole new notion of
electronic value, electronic stored money and so forth is still so new
and untried. So we're not very far down the road either in the de-
velopment of that business or in the identification of what would
be appropriate regulatory responses to it.

Mr. Campbell. I'd simply then draw your attention to the fact
that each State is developing such protocols on its own. I was a
State Senator just a few months ago and we passed such a provi-
sion in the State of California. It would be wise to integrate and
make uniform what those standards may be.

Mr. Sims.

Mr. Morris. Could I just add one quick point. Congressman
Campbell?

Mr. Campbell. Sure.

Mr. Morris. I should have mentioned it in my opening remarks.
I'm sure, in the not too distant future. Gene Ludwig, of the Office
of the Comptroller of the Currency, has been directed by Secretary
Rubin to undertake a study just like that. A number of major pa-
pers are being developed, because, you are quite correct, that this
is moving with great rapidity in a number of different areas, some
in terms of even where the government is moving to use these serv-
ices. Others, those in law enforcement, are concerned about the an-
onymity that exists there. But, anyway, the Administration is look-
ing at that very broadly.

Mr. Campbell. Thank you, Stan. Mr. Sims.

Mr. Sims. Thank you, Mr. Campbell. Earmarks generally, we
have opposed those as a matter of policy, and I can give you a cou-

pie of reasons for that. When I talk about the necessary embassy
functions and the support for law enforcement, that's got to be kept
in a broad context. We have a number of important functions that
an embassy overseas has to maintain, important economic inter-
ests, other security interests, and a variety of those.

What's happening is that as resources generally decrease, and I
see this from my perspective and the reason I raise this question
is I see Chiefs of Mission, in determining whether to add additional
law enforcement positions, faced with the prospect that they may
not be able to do that strictly for cost or space limitations or that
by adding additional law enforcement slots, some other very impor-
tant function ends up being reduced.

In that kind of environment, an earmark just for law enforce-
ment specifically is difficult. The State Department is not a law en-
forcement agency. What I'm talking about is considering the hnks
iDetween what we're trying to do in the law enforcement area and
especially dealing with a problem like organized crime, drawing
those links in determining overall resources for our missions over-
seas, because that's where I see the problem.

I testified yesterday at the subcommittee hearing on agency
staffing and related issues in the counterfeiting area and there you
see the problem crystal clear, the budget given to Secret Service for
additional posts. They make recommendations. Chiefs of Mission
are then faced with "I have nowhere to put this person" or "I can't
pay the associated costs of housing, basic functions." Therefore,
even apart from the substance, it still can't be done, and that's
what I'm talking about, being able to draw those links. In that en-
vironment, an earmark doesn t necessarily help.

Mr. Campbell. Thank you. Thank you, Mr. Chairman.

Chairman Leach. Thank you, Mr. Campbell. Ms. Velazquez.

Ms. Velazquez. Thank you, Mr. Chairman. I want to thank you,
Mr. Chairman, for holding this hearing on an issue that is not only
timely, but also of great importance to my district — organized
crimes' infiltration of tne international monetary system.

Mr. Chairman, this situation has escalated to such a degree that
today, in an area in my district, in Queens, there are over 300
money transferring systems operating in an area as small as two
blocks. Many are good, hard-working businesses. Unfortunately,
some are used as money laundering firms.

I also want to take this opportunity to thank Chairman Leach for
inviting someone with a front-line view of these problems, the Dis-
trict Attorney from Queens, New York, Richard Brown.

Mr. Morris, you mentioned before that you have jurisdiction over
money transferring. I just would like for you to tell me when you
will be addressing the issue of money transferring services.

Mr. Morris. There are several different aspects. Congress-
woman, that we need to deal with. First of all, of course, our inves-
tigative agencies are making major cases. There are obligations
and responsibilities in these organizations at present to report
large amounts of cash and when they fail to do so, it's a crime and,
in fact, they are prosecuted for that. So there are obligations at
present for these organizations. So it's not that there is no system.

We must rely, fi*om a regulatory standpoint, on the Internal Rev-
enue Service's Examination Division, who does the actual super-

vision of money transmitters and other nonbanks. There are some
quarter of a milHon such organizations. So, clearly, this is a re-
source matter and one step that we must take is, in fact, move to
register them, require registration, and then begin setting some
standards. We are, at present, relying on the IRS to do that.

I know in the State of New York there are requirements for reg-
istration within the New York Banking Department, but those are
ignored as much as they are followed. So we will try to have a defi-
nition in place first, which is not a small problem in terms of who
is covered, and a registration system before the end of the year.

Ms. Velazquez. Before the end of the year. I was wondering if
you could discuss how vou would be approaching this and specifi-
cally how you will balance the need to properly restrict illegal
money laundering without unfairly penalizing the honest business-
man.

Mr. Morris. This is, of course, very difficult in this area because
we have no Federal regulatory oversight and we have very little
history in dealing with them. As I mentioned, this includes casinos,
it includes broker-dealers, it includes money transmitters. And you
are quite correct that some 20 percent or so of American citizens
are non-banked; that is, they don't have a checking or an account
relationship with a depository institution, and their needs are very
important and they are served by many of these organizations.

We have very close relations with the Check Cashing Association
and the Money Transmitters Association. They are members of our
advisory group and we are working with them to ensure that the
legitimate functions are done. They are veiy much concerned, as
well, that the business is not tainted by this and we're trving to
work with the honest businessmen in a partnership that will bring
out those who want to abuse these services.

Ms. Velazquez. What can be done to enhance the tools of law
enforcement authorities for the investigation of illegal funds?

Mr. Morris. On that, I will defer to a law enforcement agency
here.

Ms. Velazquez. Mr. Sims.

Mr. Morris. Mr. Wankel.

Mr. Wankel. Thank you very much, Mr. Morris. As we come
Across money laundering or people and institutions and these
money transfer centers, as you refer to, during the course of our
investigations of major organizations, then we do carry forward our
investigations to target those individuals that do this. We have no
mechanism or means of |foin^ out and regulating or ascertaining
which of those are in violation. We have to work in the other
direction.

We take on the major organizations and as we come to those cen-
ters, then we do follow through in that investigation.

Ms. Velazquez. I don't know who could answer this, maybe Mr.
Morris, but in light of the fiscal constraints that we are facing in
this Nation, the search for illicit funds is draining the law enforce-
ment system. What measures can be taken to more effectively mon-
itor the legal flow of money?

Mr. Morris. One aspect that becomes very important here is
that while technology is a risk and the criminal element can use
it, so can law enforcement. We are trying to apply new software.

new artificial intelligence systems against various databases so
that we can basically set our priorities smarter, and I think that's
probably as important as anjdhing else.

One step that we are taking is trying to reduce the paperwork
that's generated by the existent system so that we can focus our
resources better. Then I think we need to make sure that there is,
as I think Governor Kelley said, a very clear coordination with all
of the players, because money laundering, as a crime, doesn't fit
easily anywhere. All of us have to work together.

Ms. Velazquez. What type of oversight do you have to detect il-
legal transactions at the local establishments?

Mr. Morris. The primary oversight from a civil regulatory stand-
point is with the Internal Revenue Service Examination Division.
Thev devote some 600 to 700 work years to that area. Yesterday,
in the meetings we had in Nevada, looking at the casino industry,
which is a somewhat different area, the acting head of Exam was
there, as well, so they are veiy important.

But on the other hand, we have to recognize that the IRS is hav-
ing serious budget problems. 600 work years applied to a quarter
of a million such organizations is a difficult problem for them.

Ms. Velazquez. What about non-banks?

Mr. Morris. That's what I mean, that's non-banks.

Ms. Velazquez. Thank you, Mr. Chairman.

Chairman Leach. Thank you, Ms. Velazquez. Mr. Royce.

Mr. Royce. Thank you, Mr. Chairman. Governor Kelley made
the point that part of the answer is to know your customer. Won-
dering about money laundering, my colleague from Florida asked
about the $100 bills, a billion dollars of which is moved per day
into Russia, and part of the response was that we do not know a
great deal about what happens in there.

Well, what we do know is that we have been told repeatedly that
many former KGB are now involved in either security for Russian
financial institutions or are directly running the operation of many
Russian banks. I should ask Mr. Sims of the State Department.
What has the State Department seen as the extent and nature of
the former KGB's involvement in Russian banking, the mafia's in-
volvement there, as a result, and in business and commerce, and
does the former KGB use these ties to Russian businesses as cover
for intelligence activity?

I'd like to make the point that this country's taxpayers send lit-
erally billions of dollars each year in assistance to Russia and I do
not know what guarantees the State Department has that this
money is actually affecting real reforms in Russia and not being
laundered into private slush funds or accounts set up to enrich cur-
rent or retired intelligence officers.

For example, former CIA employee Aldrich Ames received his
last cash payment of $130,000 from the Russian External Intel-
ligence Service in new $100 bills and his control officer said the
money came from U.S.-backed international monetary fund loans
and other western aid.

So we don't know our customer that well in this circumstance.
So if you could respond.

Mr. Sims. Mr. Royce, this will be an incomplete response and I
don't want to be incomplete.

Mr. ROYCE. Sure.

[The following information was subsequently submitted by Mr.
Sims.]

I would respectfully refer the committee to the intelligence community for infor-
mation pertaining to involvement by oflicials of the former KGB in Russian bank-
ing, business ana commerce and whether such involvement is used to advance
criminal activities and enterprises.

Mr. RoYCE. Then we can come back to that. Let me follow up
with a second question, then. Last year's international computer
hacker from St. Petersburg was able to breach Citicorp's computer
cash management system and transfer approximately $10 million
illegally. Wnat can you tell the committee about this case, if I could
ask, and has anyone been convicted and have other less well
known banks had similar problems and how secure are banks' elec-
tronic cash management systems? How secure is the Fedwire in
light of the fact that somehow, from St. Petersburg, there was a se-
ries of transfers?

And I think this is the first time, probably the first time that
that security system has ever been breached.

Mr. Kelley. Let me first make the point that that was not a
breach of Fedwire. Fedwire transactions do not come from overseas,
from other countries into the United States. That was a breach of
Citicorp's own private system.

As I understand it, it was done with the use of legitimate pass-
words and identification systems that were valid and in place. And
I do not know how that illicit access was generated.

I do believe I'm correct, and Mr. Morris probably knows much
more about this than I, but I do believe there have been convictions
in that case.

Mr. Morris. This was primarily a case of the Federal Bureau of
Investigation, and I believe their representative in the next panel
will give you more detail, more accurately than those here.

Mr. RoYCE. Thank you, Mr. Chairman.

Chairman Leach. Thank you, Mr. Royce. Mr. Hinchey.

Mr. Hinchey. Thank you very much, Mr. Chairman. I just want
to say that I think at this hearing, particularly following up on the
one tnat was held yesterday by tne subcommittee of your commit-
tee which specifically focused on the problem of money laundering,
gives this committee a very important opportunity to focus on a
problem which is of growing significance and whicn indeed I think
affects not just issues of criminal activity and our continuing efforts
to deal with criminal activity, but also a matter of national
security.

It seems to me, also, that we are, at the moment, facing an ex-
traordinary conflux of circumstances, including the continuing de-
regulation of banking activities around the world, globalization of
trade, accompanied by the increasing porosity of international bor-
ders, and a number of other variables that, in fact, make it easier
for criminals to function.

We're creating an environment that facilitates the kind of activ-
ity that you folks have to deal with on a day-to-dav basis. I'm just
wondering, in a very general way, what kind of comments you
might have for us. I know that the chairman has introduced what
looks to me to be a very important bill to try to tighten up on some

of the things that need to be done. But what, in addition to that,
do you think that this committee ought to be doing? Where ought
we be focusing our attention? What kinds of laws and regulations
ought we to De paying attention to in light of these new cir-
cumstances? I just make it in a general way to anyone who wants
to respond.

Mr. Kelley. I'm not sure that I would be able to make any help-
ful, positive suggestions there, because I think this committee has
been doing an excellent oversight job and staying on top of this
emerging problem, as would be illustrated by these hearings that
you're having right now.

We have found that we get superb support from this committee
and the Congress in the efforts that we are making and with the
needs that we might have from time to time to enhance our ability
to be effective in that area. So I think that I would express appre-
ciation for the support in an absence of any very strong suggestions
as to what further needs to be done by the committee.

Mr. Morris. I agree with Mr. Kelley. I think the most important
thing that the committee can do is what the committee is doing
today. That is bringing attention to the subject with quite irnpres-
sive representation by Members of Congress and the expression of
interest and concern. That will help all of us.

The other area, I think, is to recognize, just as you said, Con-
^essman Hinchey, that the world is changing; the financial serv-
ices world is changing, both in this country and around the world.
It is very difficult to fall back into the old patterns of typical regu-
lation. The questions made by Congresswoman Velazquez about
non-bank financial institutions is a case in point — what a financial
institution will really look like in the next century? The hearings
that I know vou've had and that you're planning in the future in
the area of electronic payment systems and the like are critical to
this process.

Keeping attention on those subjects is probably the most impor-
tant thing. I think in many cases, we don't know enough to write
regulations or even, in some cases, even to try to write legislation,
but we must keep our eye on the ball, because the world is chang-
ing with extraordinary rapidity for all the issues that you raise in
your statement.

Mr. Hinchey. Ms. Hecker.

Ms. Hecker. Yes. I have just a couple of observations. One, I
think, is that there clearly are limits to the reach of U.S. law and
regulation. Exclusively focusing on what you can regulate or what
you could pass laws about shouldn't have you lose sight of the ben-
efit of the international outreach and cooperation of the nature of
the FATF.

This cannot be solved without a global effort and requires a kind
of outreach, where you can't regulate and you don't have reach to
pass new laws. The kinds of questions being asked here today,
though, about the adequacy of those efforts, the staffing of those ef-
forts, the resources and authority of those agencies, and I would
add another point that I raised in my remarks, the adequacy of the
coordination and integration of some of those efforts.

Mr. Wankel. Just to follow on to Ms. Hecker. You're absolutely
right. You've captured it here, I think, Congressman Hinchey.

We're not going to be able to do it alone here and it's going to in-
creasingly be — as I mentioned, our partners now, as in other coun-
tries, even if they're not our partners now — ^is there has to be bet-
ter and more international sharing. There has to be better and
more international cooperative efforts.

These investigations transcend one nation into another nation.
They actually end up being multiple nations. I think that we need
to continue the increased focus in the larger body of Congress here,
the increased focus on international and transnational crime as a
foreign policy consideration. That has to continue to be elevated
and focused on. And other countries have to be more engaged in
carrying this message. This cannot continue — not strictly this way,
but it can't be seen as just a human cry from the U.S. Government.
This impacts the world. This doesn't just impact us.

We're the first to address it and speak to it, but others have to
be brought into this battle, as well.

Mr. Sims. I very much agree with what the rest of the panelists
have said. For me, what hits home when we talk about new tech-
nologies or the use of computer technology and the like is that the
real change in law enforcement cooperation that is brought about
by the ability of someone with a computer in one country going
through two or three countries' systems to take money from a Dank
in the United States. Traditionally, in terms of law enforcement co-
operation and our basic means of being able to work with other
agencies, that kind of very quick real-time need to be able to get
to Germany, to know that Grermany is linked with Switzerland and
goes to the United Kingdom, is extremely difficult in our tradi-
tional method of law enforcement cooperation.

One of my frustrations as a prosecutor in money laundering
cases was the extraordinary amount of time that it can sometimes
take just to get financial records, just to figure out what happened.
Sometimes we're talking about looking at transactions that are 2
years old or 3 years old. You couldn't have any prospective impact
in the area because you were already behind the eight ball at the
time you got documents. So that is just an extraordinary challenge,
I think, for both the law enforcement and the diplomatic commu-
nity in finding ways to increase cooperation in this changing envi-
ronment.

Mr. He^cheY. Mr. Kelley, if I may, on that particular point, I
would just be interested in what the Federal Reserve is doing spe-
cifically in this regard. You mentioned throughout your testimony
that you rely particularly upon the theory of knowing your cus-
tomer, which, of course, is very important and always has oeen.

But in these days when electronic transfers can be made so rap-
idly and can be made, also, not just rapidly, but in very complex
ways, it seems to me that it is increasingly difficult to know your
customer, particularly when you're dealing with these international
transactions.

I'm wondering what we might be thinking about to try to pro-
mote ways in which we can know our customer better, those cus-
tomers that might be trying to put something over on us and are
operating in the international arena.

Mr. Kelley, To the extent that U.S. banks are involved in this
process or could potentially be involved in this process, I think that

they are doing a better job all the time of learning how to be more
effective in this area. I'm going to look forward lo learning more
about what Ms. Hecker's study picked up as far as the European
banks, because we're constantly trying to learn and to improve and
I'm sure that there are ways that we can.

I think that knowing your customer is still quite possible to do
in the sense that when a relationship with a new customer is es-
tablished, you can go through various procedures. It is more dif-
ficult to monitor transactions which come across very rapidly and
in huge numbers. But even there, there are new provisions that are
going into place, as has been discussed here today, for record-
keeping and enhanced ability to trace transactions ex-post.

But very candidly, it is indeed a problem in the electronic age to
be able to effectively monitor the enormous numbers of very, very
rapid transactions that take place.

Chairman Leach. Thank you, Mr. Hinchey. Mr. Watts.

Mr. Watts. Thank you, Mr. Chairman. I have no questions.

Chairman Leach. Mr. Jackson.

Mr. Jackson. Thank you, Mr. Chairman. I appreciate the oppor-
tunity to join you and the committee today as we attempt to shed
light on the activities of organized crime in our national and inter-
national banking systems. I know that many of my constituents in
the 2nd District of Illinois share my concern upon learning of the
new ways that security of our financial institutions may be
compromised.

The threats to the integrity of both international and national
banking systems certainly have local implications. This is an issue
that will no doubt affect American families and consumers.

I have listened closely for the safeguards which protect consum-
ers in my district and across the Nation. I am particularly inter-
ested in learning of the impact of computerization and the
globalization of our Nation's banks. With transactions on the
Internet becoming more commonplace, I believe this committee
must most closely scrutinize developments affecting security of
both consumers and financial institutions.

Just as technological developments in telecommunications neces-
sitated major legislation and legislative action to address those de-
velopments, we must not allow technology and those who abuse it
to out-pace our vigilance.

My question really is an extension of what Mr. Hinchey just
raised moments ago, and that is really how does the "Know Your
Customer" approach address an environment which is approaching
an era of less contact between financial institutions and customers,
including PC-based banking. And I think we should take that ques-
tion one step further by raising the issue that there is a broad-
based industry in the financial industry that prides itself in not
knowing the customer. These industries thrive in low income areas
where banks do not do business or, in many instances, do not exist.

I believe it was Mr. Morris, in his testimony, on page 11, where
he said new cyber-payment systems are coming on-line, some de-
signed by brilliant entrepreneurs who know technology, but do not
even come from the financial world. So, obviously, could less rep-
utable entrepreneurs.

I'd be interested in hearing from members of our panel today
what recommendations they could make before this committee so
that this Congress and the legislation that we would propose from
this body would put law enforcement on the front side of avoiding
money laundering not only locally and nationally, but internation-
ally.

Thank you very much, Mr. Chairman.

Mr. Morris, Let me take a first cut at that. It's a very thought-
ful question. There are two parts to the question, as I see it. The
first is that we have to look at a financial institution's, whether it's
banks or non-banks, relationship with its customers differently. We
designed, 25 years ago, a reporting system for currency that is
founded largely on a teller providing information to the government
at the counter on transactions above $10,000.

Tellers are probably the weakest link in a traditional bank. They
change; they're hard to train; and, indeed, it's not clear that they
really know their customer and know their customer's activity. It
is very unlikely that most tellers could actually identify significant
suspicious activity. That has to be done back in the central part,
the back rooms of where the bank has to operate.

Banks already have risk management systems and the like. I
know the Bank of America and Citibank and some of the larger
ones have developed software applications that begin to identify
the transaction activities of their customers, unusual activity. What
constitutes a usual transaction or cash activity in a McDonald's?
And if you've got four or five of them that are doing $20,000 to
$25,000 a week and you've one of them that's doing $150,000 a
week, that's unusual and the government should probablv know
that. We should work with the bank on that. But it has to be done
in different kinds of ways.

And the second part of your question is also true, and that is
particularly in the areas where we have the unbanked and they
rely on other usually non-regulated services. We have to build a
regulatory scheme that recognizes their uniqueness, builds certain
obligations on them, but also recognizes that they're not large de-
pository institutions. One thing that we say time and time again
in our regulatory efforts is one size does not fit all. The check
casher, who also is a money transmitter, who is doing regular busi-
ness, is an honest businessman, can't be dealt with in the same
way as First Chicago Bank.

Mr. Kelley. a point or two that I would add, Mr. Jackson. You
are quite correct that as technology evolves, the difficulty of know-
ing your customer is going to increase. But I don't believe that
there is anything in that that really obviates the ability of banks
to have a very good handle on who their customers are if they do
appropriate diligence at the point of time where a relationship with
a new customer is established.

We encourage site visits, where that's appropriate; background
checks, where that's appropriate. And I think particularly relevant
to your question, we would like our banks to have an understand-
ing of what type of transactions they should expect to occur from
a new customer relationship. They will get an answer back that ei-
ther makes sense and they'll proceed with it, or else there will be

something there that makes their nose twitch and they will not
proceed with it.

Then they should have and do have systems in place that would
identify transactions that come across their books which are out-
side of the expected type of transaction that a given customer is ex-
pected to be involved in. And when that occurs, they are expected
to investigate it and perhaps report it under the new reporting sys-
tem that we've discussed a little earlier this morning.

So the "Know Your Customer" policy will continue to work, even
though the means by which it is operated are going to definitely
have to evolve as these relationships evolve.

Let me add one other point, and that is that the Federal Reserve
is expanding its electronic format, whereby messages are trans-
ferred from one financial institution to another, to oe able to ac-
commodate a much larger field of information on those wires as
they move. This is going to enable us to follow transactions through
as they go from institution to institution.

There is a new rule being put into place by the Treasury which
goes by the name of the Travel Rule, which is going to require that
certain originating and ultimate destination information goes along
with a funds transfer as it moves from institution to institution. So
it will be much more difficult for a party with some illicit objective
to be able to move funds through and lose the identity of their
origination along the way. I think that is going to be a big step up.

Mr. Jackson. Thank you.

Chairman Leach. Thank you very much. Chairman Gonzalez.

Mr. Gonzalez. Thank you very much, Mr. Chairman. First, I ask
unanimous consent that 1 would be permitted to offer some opening
statements.

Chairman Leach. Without objection.

Mr. Gonzalez. I had one question for Mr. Sims. It's clear from
todays testimony that the problem of financial crime is, of course,
international in scope. It is equally clear that to effectively combat
international criminals government officials and law enforcement
agents must work cooperatively with their foreign counterparts.

With that in mind, I was disturbed to learn from the GAO report
that many foreign countries still refuse to share information perti-
nent to money laundering in investigations, despite international
agreements. The question I have is that I understand that the
State Department is now completing a 1996 assessment of world-
wide money laundering.

I'd like to know if you have detected an improvement in the will-
ingness of countries to share information in accordance with their
international agreements. Two, what has the State Department
done to encourage these countries to live up to their agreements?
Three, what is tne State Department doing to secure cooperation
from countries that so far have not signed agreements with the
United States?

Mr. Sims. Thank you, Mr. Gonzalez. Let me take a cut at those
questions. In fact, this relates to Mr. Morris' testimony, as well,
and I'm sure he'll want to discuss these issues.

In terms of overall cooperation, there are a couple of areas that
are problematic for the Department and, I believe, for law enforce-
ment agencies, as well. Many countries require dual criminality, for

example. The offense must be criminalized in both countries. Some
countries require that even for the sharing of information.

Where that is the case and a country has not criminalized money
laundering generally or, say, that they've only criminalized narcot-
ics-related money laundering, but not non-drug money laundering,
that's a significant interference with the ability to cooperate.

There are additional problems that are country-specific. We are
trying to approach this problem in a wide variety of ways, because,
again, the differences among countries and the problems with indi-
vidual countries differ quite tremendously.

One way is the President's money laundering initiative to iden-
tify the more egregious sanctuaries for laundered proceeds, to enter
into specific negotiations with those countries to change that sta-
tus. That's a process that Treasury is leading and I think is ex-
tremely important, because we're confronted with a range of quite
serious problems. We are also trying to do that on a bilateral basis
as these issues come up.

And as I said in my testimony, we are undertaking a number of
initiatives, some in the training area, for example, to increase our
ability both to get effective partners overseas, but also to make op-
portunities for our law enforcement officials and officials from other
countries to work more cooperatively together.

We have a number of international fora that we're working in to
improve cooperation specifically in money laundering and financial
crime, including our G-7 countries, discussions along with the Rus-
sian Government; the Financial Action Task Force; the work in the
Summit of the Americas and the like. So it's hard to specifically an-
swer, because this is such a broad problem, but I think that's the
range of approaches that we're taking.

I think it is the case that — and I believe Stan mentioned this in
his statement at one point. There has been what I think is a sea
change in terms of the international view of this problem. It struck
me during the President's speech at the U.N., where he made the
problem of money laundering and international crime a significant
portion of the speech, his concerns were echoed by the Secretary
General of the U.N. and that was something that, in my experience
both at the State Department and as an Assistant U.S. Attorney,
you just did not — ^you didn't hear that talk, that sort of recognition
that this is a true national security threat and it's not just a prob-
lem for the United States.

I think that offers some ray of hope that the international envi-
ronment is changing significantly. So I'd have to say that there has
been progress, but there are still obviously significant problems.

Mr. Gonzalez. All and all, is there an improvement in the will-
ingness of those governments in accordance with the international
agreements?

Mr. Sims. I think it is fair to say that there is a net improve-
ment. However, as I said, there are such significant obstacles that
it's hard to make that a blanket claim.

Mr. Gonzalez. What can the State Department do in itself to en-
courage these countries?

Mr. Sims. Well, one thing we are attempting to do very aggres-
sively is make this a priority for our foreign policy. Traditionally,
the law enforcement component and law enforcement interests

were not considered. What we have tried very hard to do, and Sec-
retary Christopher has really been a leader in this, is to make this
an important element for our foreign policy. So that we're on the
ground dealing with higher level officials, that they understand
that this is a significant concern to the United States as a foreign

Eolicy and national security issue and not just, as traditionally has
een the case, that these law enforcement concerns were local cop
issues and why should we be dealing on a government-to-govem-
ment basis. Certainly, that was the attitude with some countries.

So part of what we're trying to do is, both internally and in our
dealings with foreign governments, to make it clear tnat that is a
priority for the United States. I think that that has helped change
or started to change this international environment.

Mr. Gonzalez. Do you think that has helped to encourage these
countries?

Mr. Sims. That, plus the other range of initiatives.

Mr. GtoNZALEZ. They've entered into the agreements, have they
not?

Mr. Sims. Yes. There are several countries for which — I think
that that is true, that we've had sort of problems with performance
and previous commitments. There, as I said, we've got this range
of responses that we're attempting to use.

Mr. Gonzalez. What about those countries that have not signed
agreements with the United States?

Mr. Sims. There, as part of our overall initiative, the President's
initiatives, we're targeting those countries to do just that, to have
very specific — where we find sort of egregious money laundering
and specific kinds of problems with country performance.

Once we have identified that range of countries, to open up a
new round of negotiations to specifically do that. That's part of the
initiative that Mr. Morris discussed and the Treasury is leading
and we view that as critically important.

Mr. Gonzalez. I believe some of the other questions I had have
been anticipated. Thank you.

Chairman Leach. Thank you. Mr. Flake, did you want to ask
questions?

Mr. Flake. No, Mr. Chairman. I merely ask unanimous consent
to have my statement placed in the record and since I was not here
for the entire testimony, I will wait for the next panel. Thank you.

Chairman Leach. Without objection, so ordered.

[The prepared statement of Hon. Floyd H. Flake can be found on
page 87 in the appendix.]

Before dismissing the panel, I would like to ask just one ques-
tion, because it relates to some legislative endeavors we're cur-
rently contemplating. As you all know, Interpol resulted fi*om a
1929, I believe, counterfeiting convention. As we look at the inter-
national environment, is there a need for a new Interpol-like insti-
tution in financial crime or a division within Interpol or a new
international arrangement that goes beyond the current inter-
national arrangements that exist?

Have you given thought to that? I'd like particularly Mr. Morris
and Mr. Wankel to address this.

Mr. Morris. Yes, we have given some thought to this. If there
was one point I was trying to make in my opening remarks, it was

that money laundering is very unique as an activity, at least in
terms of how governments need to deal with it. It is not just an
issue of law enforcement, as you can see by the panel here.

The bank supervisors have major responsibilities, in many ways
as important as anjrthing that can be done on the law enforcement
side. Clearly, law enforcement has a major role. It's also a part of
the foreign affairs issue. This became crystal clear in Secretary
Rubin's efforts in Buenos Aires at the Summit of the Americas
Ministerial Conference. I remember sitting with him, initially brief-
ing him, and some of his staff who were concerned that there was
kind of a varied group of representatives of the respective nations.
It wasn't the normal meeting of finance ministers that Secretaries
of the Treasury are used to dealing with. The Attorney General has
the same problem.

You're dealing suddenly beyond the normal way that we conduct
business. So it's not so easy to try to figure out a new convention
to do that. The Financial Action Task Force comes as close as we
have, because we have observers there from the United Nations,
which plays a very significant role; from Interpol, as you point out,
who iust passed a resolution in Beijing in October on this subject;
and from the World Customs Organization.

The representatives of the countries come from the central banks
or the finance ministries and, in some cases, it's the only time they
really come together to discuss issues. We've been trying to move
to create a regional financial action task force. We have established
one in the Caribbean. We're about to establish one in Asia and
we've had some discussions with the Consul of Europe to try to do
the same thing in eastern Europe and the former Soviet Union.

We have thought about a way of bringing what you're trying to
accomplish, but this is more difficult because of the complexity of
governmental entities that have to deal with it. If we come up with
some order to do that, it's going to break down a lot of the existing
barriers and that, I think, is much more difficult. But I think,
clearly, the level of importance that this committee has evidenced
both today and over the last few years, and Chairman Gonzalez be-
fore you, suggests that we should try.

I'm sure, that given the overview that GAO did and their effort,
I would be surprised if they didn't feel the same way.

Mr. Wankel. I agree completely with Mr. Morris. There is no
doubt that we need to work hard as the U.S. Government with the
various entities represented at this table, to increase the awareness
and the cooperative efforts in the international arena. Whether or
not establishing or proposing something along the lines of either
Interpol on financial or a segment or something under Interpol, I
don't know if that would become more a part of a problem as op-
posed to part of the solution. I don't know, given some of the his-
tory over there.

But it is something that has to, I think, measure, evaluate and
consider what the options are, but I don't really have a position
myself as far as a recommendation right now.

Chairman Leach. Mr. Kelley.

Mr. Kelley. Mr. Chairman, to the extent that you're focusing on
law and/or legal and criminal interrelationships directly, it is a lit-

tie bit beyond my portfolio and I'm not sure that I have anything
constructive to add there.

Insofar as central banks are concerned, I believe it has come out
already this morning, that central banks are cooperating much
more extensively in recent years and I think quite effectively. I
would like to give some thought to and respond to you as it would
relate to potential additional legislation that would help that proc-
ess, but I am not immediately clear that we need any further legis-
lative authority to be able to work more effectively with the central
banks in our areas of responsibility.

Chairman Leach. Good. Thank you. Well, I appreciate all of your
comments. We are open to suggestions, informally as well as for-
mally. So we hope we could have continued contact with each of
your offices. Thank you very much. We'll take a 1-minute recess as
the next panel comes up.

[Recess.]

Chairman Leach. I would like to make an announcement. They
have placed a vote on the floor and I think it would be wise, given
the timing of the vote, and my apologies to the panel, but that we
would recess, pending the vote, probably until 1:00. So we'll begin
precisely at 1:00. The committee is in recess.

[Recess.]

Chairman Leach. If the committee will reconvene. Our second
panel will be of law enforcement and financial crimes experts. Our
witnesses will be, from the Department of Justice, Mr. IVlark Rich-
ard, who is the Deputy Assistant Attorney General, and Mr. Rich-
ard is on his way; from the Secret Service, Mr. Robert Rasor, who
is Deputy Assistant Director, and, I might say, is particularly well-
educated, having been a graduate of Iowa Wesleyan College, upon
whose board I have served; from the Federal Bureau of Investiga-
tion is Mr. Chuck Owens, who is a Section Chief in the Criminal
Investigative Division of the Financial Crimes Section; and, our
fourth witness is Mr. Richard A. Brown, who is with the U.S. Dis-
trict Attorney's Office of Queens. You're welcome, Mr. Brown.

Why don't we begin, then, in the order we have it, with the Se-
cret Service, Mr. Rasor.

STATEMENT OF ROBERT H. RASOR, DEPUTY ASSISTANT
DIRECTOR, U.S. SECRET SERVICE

Mr. Rasor. Mr. Chairman, thank you for the opportunity to ad-
dress this committee on the threat posed by organized criminal
groups to financial systems and, I might add, also, to commerce
systems and countless individual victims, both in the United States
and abroad.

In your opening statement this morning, you made it clear that
you and this committee have identified really the crime of the
1990's and beyond, that being organized financial crimes. We are
extremely pleased to be here because as an agency that is fully en-
gaged in that fight, we think it's a great opportunity.

I'm representing the U.S. Secret Service today in my capacity as
Deputy Assistant Director for the Office of Investigations. I have
with me today Mr. Michael Stenger, who is the agent in charge of
our Financial Crimes Division; Rich Caruso and Craig Spraggins,
who are also members of the Financial Crimes Division.

As you know, the U.S. Secret Service was originally established
in 1865 solely to suppress counterfeit currency in the United
States. Today, the Secret Service has investigative jurisdiction for
a host of core financial crimes commonly used by organized groups
to attack financial systems on a national and international scale.

The U.S. Secret Service has seen an emergence of several major
international organized criminal groups, systematically attacking
the financial systems through financial institution fraud, counter-
feiting of U.S. currency, credit card fraud, advanced fee fraud, com-
puter fraud, and telecommunications fraud. All of those violations
are investigative program areas within the U.S. Secret Service in
which we have accumulated specific expertise and ongoing
proactive initiatives.

I have a formal statement that I would like to introduce for the
record at this time and then I would like to go on and summarize
some of those comments, particularly focusing today on identifica-
tion of the groups, current trends of the groups, Secret Service
response, and what we can do specifically about some of the
problems.

Chairman Leach. Without objection, your statement and the
statement of all the witnesses will be placed in the record.

Mr. Rasor. Thank you, Mr. Chairman. In identifying the groups,
it almost comes to a situation where you're reminded of trying to
thank everybody in an audience and not being sure that you have
thanked everybody, but you try. With that in mind, I'll mention
some of the groups that are more prolific and more problematic.

At the onset, the Secret Service distinguishes between structured
traditional organized crime, such as La Cosa Nostra, and what is
now commonly referred to as organized criminal groups. These
groups include Nigerian cells, Asian triads, Russian criminal net-
works. Middle Eastern organized crime groups, and South Amer-
ican cartels.

Other domestic groups have been associated along philosophical
lines, such as Posse Comitatus, the Aryan Nation and/or white su-
premacist groups. Many of these groups do not follow prior pat-
terns associated with organized crime in relation to structure. How-
ever, these groups do support themselves internally through ethnic
association, while externally creating enclaves for criminal oper-
ations, both on a domestic and international scale.

It is apparent to the Secret Service that traditional investigative
techniques are difficult to use and there needs to be new ways to
deal with the organized and diverse criminal elements. In the trend
area, probably one of the most common trends that we've been able
to notice is that these groups have become experts in their criminal
fields. In short, they do their homework on the financial systems
and identify weaknesses in systems that allow them fraudulent ac-
cess to millions of dollars.

The attacks and criminal successes of the organized groups are,
more often than not, a result of careful planning, precise execution
of the scheme, and ultimately taking advantage of financial sys-
tems originally designed to be consumer or customer-friendly. That
will be one of the weaknesses that I'm going to talk about and
some of the things that we can probably do to strengthen our
resolve.

Many people still believe that white collar crime is an end unto
itself. We have noticed that one of the trends is that that's not nec-
essarily true. What these groups are doing, they're committing fi-
nancial crimes in order to support a criminal lifestyle. We have no-
ticed a very close association between these types of crimes and
violent activities, such as murder, drug trafficking, extortion, pur-
chase and exchange of firearms and explosives, money laundering,
alien smuggling, car theft, and prostitution, just to name a few.

It must be understood that when we're talking about trends, al-
though we may not specifically be talking about collapse of sys-
tems, we are talking specifically about responsibility for systems al-
lowing massive fi*aud and massive funneling of monies into the
criminal environments of this country and countries around the
world.

I'd like to just make a couple of comments on the responses to
the problems. The responses reminds me of another adage — there's
just so many groups and so little time to discuss them. For this
morning's presentation, I have chosen to talk about responses to
two major areas of problems, that being in Nigerian organized
criminal activity and Asian organized criminal activity, although
there are many others and in my statement we have outlined
those.

The Secret Service took a proactive approach in 1984 to West Af-
rican organized crime by establishing and maintaining task forces
throughout the United States whose focus includes the investiga-
tion of Nigerian perpetrated fraud. The Secret Service has task
forces located in Boston, Newark, Baltimore, Washington, DC, At-
lanta, Miami, Charlotte, Houston, Dallas, and Chicago. Members of
these task forces include U.S. Customs, Immigration and Natu-
ralization Service, U.S. Postal Inspectors, as well as members of
local, county, and State police agencies.

Currently, the most prolific fraud scheme being perpetrated by
Nigerian organized criminal groups is what is known as "advanced
fee fraud" or "419 fraud." The 419 nomenclature refers to a Nige-
rigin fraud statute that's used to make these activities illegal in Ni-
geria. Nigerians purporting to be officials of their government,
banking system or oil export/import companies have mailed or
faxed letters to individuals and businesses alike in the United
States and around the world, enticing citizens to partake in million
dollar windfalls, if they would respond with personal identifiers,
such as social security numbers, bank accounts, and phone num-
bers.

The individual becomes a victim when they fall for the scheme
and wire transfer fees up front to pay for the bribes, taxes, and
legal fees, which the Nigerians have said must be paid prior to the
deal being consummated.

I have brought today a number of examples of those, which I
have sitting to my right, which we can discuss if you would have
any questions relative to that.

It has become so prolific that the U.S. Secret Service has insti-
tuted an operation that tracks these letters and victims. There are
currently over 20,000 entries in this database and indications that
there are American citizens who have lost millions of dollars.

Americans have gone to Nigeria in hopes of recovering their money
and have been found murdered after being reported missing.

It is interesting to note that in that database, I just did a quick
check before I came up here, and we have cases, referrals or prob-
lems that touch every single member of this full committee. Each
and every State has letters in that bin where their citizens are
being attacked by this particular problem. So it's pretty large in
scope.

On the success side in the response, just as an example, two of
our cases most recent in the Newark area ended up with arrests
and losses detailing $5 million one case, $12 million on another
case. I have highlighted in my testimony murdered American citi-
zens. What we nave found is that this has turned to an ugly busi-
ness. People from around the world are going to Nigeria and end
up being murdered or missing. We saw that as a problem. So we
created a pilot project in 1995, where we now periodically send
agents to the U.S. Embassy in Lagos to assess the problem.

While they were there last time, they assisted in taking out
seven Americans who were there for the purpose of being enticed
into the 419 schemes and were probably in harm's way. The Em-
bassy reported that before we started that process, they were see-
ing about 40 Americans a month coming into Lagos in search of an-
swers to the question. That now has been reduced to somewhere
around four per month.

We're most proud probably on the proactive side of the interdic-
tion that we've done in this process. We've probably saved 400 peo-
ple that we know of from becoming further involved in these
schemes or putting themselves in harm's wav. As recently as last
night, I believe it was Houston, we took people basically off an air-
plane thac had already lost somewhere around $40,000, were ready
to commit another $70,000 to the process, and, again, probably
would have been in harm's way.

In Asian organized crime, I've just put up two brief examples of
what goes on relative to paper cases and plastic cases. One is called
Operation Plastic Dragon. It's a case where Asian organized crime
had successfully done about 65 million dollars' worth of damage
through counterfeit credit cards. The other one is Paper Dragon,
which is an ongoing case relative to the desktop publishing of coun-
terfeit commercial and payroll checks around the United States.
Losses in that case are somewhere around $20 to $25 million.

In addition to that, we have an ongoing case in Santa Ana that's
called Operation Repayment. Kind of an interesting concept. The
losses in that case were somewhere around $40 million at the time
of arrest and the banks and institutions involved believe those
losses are going to soar to somewhere in the neighborhood of $100
million.

The basic scheme there was they repaid or prepaid existing cred-
it card accounts with bad checks. The way the system was de-
signed, the system would credit that amount before it made a de-
termination that the check was bad. In the meantime, they paid
true account holders up to a 50/50 split to then go do cash ad-
vances on those cards. When it all folded in together, they all
claimed bankruptcy. An interesting scheme.

That kind of highlights some of the trends, some of the activities
of the Secret Service. I'd Hke to focus now on recommendations to
the problem. The U.S. Secret Service believes the solution to the
problem is found in one of the core responsibilities of the Depart-
ment and the agency, and that is, in quotes, "protection of the U.S.
economic and financial systems."

The Secret Service believes that our law enforcement role must
and does transcend normal reactive arrest and prosecution re-
sponses. The proactive approach must be utilized to analyze defects
and prevent attacks on financial systems. The U.S. Secret Service
has testified before a number of committees during the last 2 years
on the issues of financial and electronic crimes, counterfeiting of
checks and currency, false identification, desktop publishing, and
organized criminal activities in these areas. Our message remains
the same.

We must collectively look at the systems that are being attacked
and fix the systems in order to diminish criminal activity. The Se-
cret Service employs a very successful process of linking risk analy-
sis with our criminal investigations to not only arrest the individ-
uals, but to identify the weaknesses or the cause of the problem
and then, through either regulatory review or through business
partnerships with industry, go back and actually fix these systems
so we don't have repetitive type violations.

The Department of the Treasury promotes a concept of "Know
Your Customer." We believe that concept, when applied correctly,
is a tremendous deterrent to financial fraud schemes. The U.S. Se-
cret Service, through previous testimony, has stated that biometric
identification would be an even greater deterrent. It's important to
not only know your customer. You need to know and protect your
system.

As most financial crimes and losses occur by criminals assuming
false identities and penetrating accounts with stolen access codes,
biometric identification would oe a solution to the problem. I am
pleased to report that the financial community and the Federal,
State and local governments are beginning to adopt biometric iden-
tification as a proactive solution to financial crimes and losses.

Bottom-lining out my comments, I would say that you've heard
testimony here this morning from the first panel relative to regu-
latory discussions. A number of questions came up of what should
we do about the problem. I would say this — these are smart crimes
and we have to be smarter than the bad guy. Really, we are smart-
er. The representative group at this table today is clearly smarter
than the bad guys. But collectively, what we have to do is focus our
attention on how these crimes continue to occur and realize the se-
riousness of the crime is in the ability of this money to then be
rechanneled into the violent criminal element in society here in the
United States and around the world.

This is how the bad guys live. If we want to stop the bad guys,
one of the quickest ways to do that is cut off their money supply.
These things are not done as an end to themselves. They're done
to proliferate a criminal lifestyle.

Finally, we must understand that there is a responsibility, both
in government and in industry, to appreciate that problem. It's not
enough to say that these losses become insignificant in the overall

scope and magnitude of commerce. What has to be reahzed is that
there is responsibility to make these changes, to stop this type of
activity, to protect the individuals on the street and to stop the vio-
lence that you see on television every night. That's how those
things are accomplished. In short, we have to fix the system.
Thank you very much.

[The prepared statement of Mr. Robert H. Rasor can be found on
page 163 in the appendix.]

Chairman Leach. Thank you, Mr. Rasor. Before turning to Mr.
Owens, I would like to recognize the distinguished lady from New
York, Mrs. Maloney, who has a conflicting circumstance.

Mrs. Maloney. Thank you, Mr. Chairman. I have an unavoid-
able time conflict, but I would like to have the opportunity to pub-
licly recognize and thank Mr. Brown, Queens' District Attorney, my
own District Attorney, for cracking the credit card fraud ring oper-
ating in New York City. I would like to request, Mr. Chairman, if
we could put the indictment in the record and I just wanted to
thank you for all that you have done. We are very proud of you in
New York City and the Nation is, too. Thank you. Thank you, Mr.
Chmrman.

Chairman Leach. Thank you, Mrs. Maloney. We appreciate it.
And when you say he's your District Attorney, you're not saying it
in the way that the cabinet is saying they have their own.

Mrs. Maloney. Well, he represents me and he does a fine job.

Chairman Leach. Yes, very well.

Mrs. Maloney. And working on this particular problem that
we're looking at today.

Chairman Leach. Thank you. We will turn to Mr. Brown, but
first, Mr. Owens.

STATEMENT OF CHARLES H. OWENS, SECTION CHIEF,
CRIMINAL INVESTIGATIVE DIVISION, FEDERAL BUREAU OF
INVESTIGATION

Mr. Owens. Thank you, Mr. Chairman. It's a pleasure to appear
before this committee today as a representative of the FBI as you
discuss emer^ng financial crimes and organized criminal groups.

This committee is well aware of the extensive commitment of the
FBI to the investigation of white collar crime, which is the FBI's
largest criminal investigative program. At present, the FBI
has over 22,500 active investigations in the white collar crime pro-
gram, which is an extremely diverse program, addressing not only
financial institution fraud and national and international fraudu-
lent schemes, but health care fraud, governmental fraud, bank-
ruptcy fraud, environmental crimes, computer crimes, and money
laundering.

Our current assessment of the financial institution crime prob-
lem is that while the institutions were suffering from insider prob-
lems in years past, the extent of outsider fraud has been rising in
recent years. These outsider frauds, which are victimizing financial
institutions as well as other businesses and individuals, include ne-
gotiable instruments fraud, and credit card fraud. Money launder-
ing is also of growing concern as criminals devise new and complex
ways to disguise and make use of proceeds of criminal activity and
computer crimes will challenge law enforcement for years to come.

Of particular interest to the FBI is the high incidence of orga-
nized criminal groups perpetrating such crimes in the United
States and from outside the United States. Numerous cases have
been investigated by various FBI field offices in which counterfeit
negotiable instruments, such as prime bank notes, certified money
orders, and bonds, purportedly issued by foreign governments have
been utilized.

While the attempted use of counterfeit negotiate instruments in
various firaud schemes has risen in recent years, many of these at-
tempts, fortunately, result in minimal actual losses. When losses do
arise, working with the U.S. Attorneys and other agencies, as ap-
propriate, the FBI is aggressive in pursuing such matters. As an
example, the FBI's New York Field Office has utilized various in-
vestigative techniques in one operation, code named Prime Note,
investigating multiple criminal groups, many with international
connections involved in stolen and counterfeit negotiable instru-
ments, bank firaud, credit card fraud, and money laundering.

This operation has resulted in 79 arrests and 42 indictments,
with $2 million recoveries and $6.75 million in losses prevented. In
Operation DERAILED, in the northern district of Georgia, the FBI
and IRS, along with other agencies and local police departments,
investigated an organized group which had relocated to the Atlanta
area from New Jersey and was involved in multiple types of finan-
cial crimes.

This group recruited bank employees and others to assist in ne-
gotiation of counterfeit and stolen checks, credit card fraud,
telemarketing fraud, insurance fraud, and other crimes. The total
losses attributable to this group exceeds $10 million and to date 20
individuals have been convicted.

In view of the increasing incidents of international financial
crimes, the FBI has taken steps to improve our ability to success-
fully prosecute offenders. The key to success in combatting inter-
national crimes is developing close working relationships with for-
eign law enforcement. The FBI has recently added legal attaches
in several foreign countries, including Russia, and has representa-
tion in Beijing, China.

By agreement between the governments of the United States and
the United Kingdom, the first-of-its-kind joint investigative team,
comprised of FBI agents and British police officers, has been estab-
lished, working from the Miami FBI office, addressing financial
crimes in the British dependent territories in the Caribbean. The
FBI is also providing direct assistance to certain countries in finan-
cial crimes investigations impacting multilaterally.

One such matter we are conducting, as requested by the Depart-
ment of State, is the investigation of a major bank failure in the
new Latvian Republic. Just 1 week ago, the FBI coordinated strat-
egy sessions held in Germany with law enforcement from five coun-
tries involved in this investigation.

Computer crimes, principally threats to the national information
infrastructure, are a high priority of the FBI. We have established
dedicated regional computer crime squads in Washington, DC, San
Francisco and New York, and the Director has recently approved
the establishment of the Computer Investigation and Threat As-

sessment Center to coordinate computer crimes investigations, in-
cluding those which impact national security.

I also noted in the earlier testimony that Congressman Royce
asked about the Citibank case and while I didn't have it in my ini-
tial remarks, I can certainly respond to that, if you wish.

But let me close by saying that the FBI's efforts to combat
emerging financial crimes inside the United States and outside its
borders are extensive. ! look forward to responding to any ques-
tions that you have.

[The prepared statement of Mr. Charles H. Owens can be found
on page 179 in the appendix.]

Chairman Leach. Thank you, Mr. Owens. Mr. Brown.

STATEMENT OF RICHARD A. BROWN, DISTRICT ATTORNEY,
QUEENS COUNTY, NEW YORK

Mr. Brown. Thank you, Mr. Chairman. I thank you and your
distinguished colleagues for the opportunity to be here today.

As the District Attorney of Queens County in New York City, I
represent a constituency of almost 2 million people. I have the re-
sponsibility of prosecuting some 60,000 arrest cases every year and,
in addition, I have a rather significant investigative role in such
areas of criminal conduct as narcotics trafficking and organized
crime, labor racketeering, economic crime, and criminal activity at
both Kennedy and LaGuardia Airports, which are located in our
county.

I furnished your staff with copies of my formal testimony and I'm
pleased that you are good enough to incorporate those remarks in
your record. In the brief time allotted to me this afternoon, I want
to try, if I can, to summarize that which is contained in that formal
submission, which deals with a national problem of growing, indeed
alarming, proportions; namely, credit card fraud and the financial
abuses that arise therefrom. I would also like, if I might, to re-
spectfully suggest how it is that I believe that we might at least
partially respond thereto.

I have with me Senior Executive Assistant District Attorney for
Investigations in my office, John M. Ryan, and the Chief of our
Economic Crimes Bureau, Mike Mansfield, and Jeff Horblitt, who
is an Assistant District Attorney with our Economics Crimes Bu-
reau and, I would note, a former member of the Bureau.

Let me just take you back, if I might, for just a couple of seconds.
Last September, we arrested a woman who was attempting to use
a counterfeit credit card to purchase a fax machine and a
computer. Store employees suspected that the card was counterfeit,
notified the authorities, and rather than simply charge her with at-
tempted grand larceny and put her into the criminal justice sys-
tem, she was debriefed and an investigation was conducted, an
investigation that ultimately led to an apartment on a quiet resi-
dential street in Queens County.

Pursuant to search warrant, a team of investigators from my of-
fice, the U.S. Secret Service, the U.S. Postal Inspection Service,
New York City Police Department, raided that apartment and we,
I think all of us, I was there that evening, were absolutely amazed
with what it was that we found.

We found in that apartment hundreds of counterfeit and stolen
Visa, Master Card, Discover Card, American Express credit cards.
We found stacks of plastic cards in various stages of being counter-
feited. We found hundreds of U.S. Postal Service change-of-address
forms, holographs, magnetic tape, all kinds of other equipment
used to manufacture counterfeit credit cards, including an encoding
machine, which is used to insert data on a magnetic strip that is
contained on the card, an embossing machine that presses out the
raised letters on credit cards, a tipping machine for applying the
gold colored ink to the raised letters.

We also found quantities of access numbers for credit cards, bank
accounts, as well as computers and cell phones, beepers, a great
deal of personal information about people all over the country,
some of which was stored in computerized databases that were con-
tained within the apartment.

Following that raid and the accumulation of all of that evidence,
we put together a team of experts and we began, over a 5-month
period, to go through every invoice, every credit statement, every
change of address form that we had acquired, all of the records
found in the apartment. And as a result, earlier this month, we
were able to file, in the Supreme Court in Queens County, a 200-
count indictment under New York's Organized Crime Control Act,
which is the equivalent of the Federal RICO Act, which charges
eight Nigerian nationals with operating a multi-million dollar coun-
terfeit and stolen credit card ring out of that apartment, a ring
that specialized in the theft of credit identities of thousands of indi-
viduals across the United States and that had contacts throughout
the entire world.

Just to try to briefly explain to you how it is that this ring oper-
ated, as we have alleged in this indictment, let me just say that,
in the first instance, these ring members take advantage of their
positions as employees of retail establishments. They steal credit
card receipts and invoices. They take the names, the addresses, the
credit card numbers of their customers off those invoices.

The search warrant, for example, in our case, produced boxes
upon boxes of invoices stolen, for example, from a Watertown, Mas-
sachusetts appliance store, a storage facility of Budget Rent-a-Car
up in Warwick, Rhode Island, from a Shell gasoline station in
Evanston, Illinois.

We also found that the stolen credit card receipts and invoices
were delivered to others within the ring and they, in turn, would
go out and obtain additional data about the cardholder. They'd gain
access to his or her credit identity and with that information,
they'd go ahead and make up fake photo ID cards and driver's li-
censes, all of which were used to obtain and purchase goods and
services.

And they didn't stop there. They just kept going on and they'd
get into the credit reporting services, like Equifax or TRW. They'd
go to a mortgage company, they'd go to a car dealership, and they'd
begin to accumulate other credit accounts, learn additional per-
sonal information, data that is contained within the kind of credit
background check, and then the information is, again, used to cre-
ate all of these other means of identification and the ability to get
into credit card accounts.

Another tactic that was used with great frequency was to divert
the cardholder's mail to mail drops in other cities that were con-
trolled by the ring in order to obtain information about their vic-
tims. This was done simply by filling out and submitting a forged
U.S. Postal Service change of address form at a local post office,
based upon personal information that they had gathered about
their particular victim. No identification is apparently required by
the Postal authorities to change your mail address.

Indeed, these change of address forms can simply, as I imder-
stand it, be mailed to a local post office. The mail will be inter-
cepted and it will be diverted to another address or to a post office
box or a mail drop that's rented by the thieves in other cities.

Another thing that they do is they are very much involved in
stealing valid credit cards, pre-approved credit from the mail or in
batch thefts. For example, in our case, in that apartment were
many Bank One and AT&T Universal cards that were stolen from
the airport at Houston, Texas in 1995. And once in the possession
of a victim's mail or their stolen card, the ring members can readily
activate the cards. They can request new PIN numbers on existing
cards. They could access the victims' funds to the extent of their
credit limit.

Another example that I would tell you astounded me was the fact
that they're into the thefl of credit information directly from finan-
cial institutions. In our case, for example, we found computer
sheets that were stolen last year from the Chemical Bank in New
York City, on which appear the name, the address, the social secu-
rity number, the personal data, the credit limits, the tracking infor-
mation, and the PIN numbers for Chemical Bank Visa and Master
Card holders. That information on those computer sheets, believe
it or not, just the stuff that we seized, provided access to some $600
million in credit.

So that gives the committee some idea of the size and the mag-
nitude of tne problem. Worldwide, it's estimated that credit card
fraud right now is running about $3 billion, half of that in the
United States. Of course, tne damage is irreparable and particu-
larly the victims of credit card fraud, because it takes them months
and ofttimes years to restore their own credit status and their own
reputations.

While the industry seems to have taken a number of steps in re-
cent years to cut down on credit card fraud and certainly the law
enforcement community has been doing its share, I would argue
that there is much that remains to be done, and I would like to
just run through a couple of quick thoughts that I have in terms
of things that can be done.

I think, first and foremost, the U.S. Postal Service should be re-
quired to immediately take action to prevent the fraudulent diver-
sion of mail. The Postal Service, I would argue, makes it relatively
easy for credit card thieves to divert mail today. These change of
address cards can be sent in by m.ail with no questions asked. No
personal appearance is required, no photo ID is required. The post
office will simply go ahead and forward your mail, including your
bank statements, your investment account reports, your credit card
bills, pre-approved credit, which is out there in great numbers, to

whatever location or whatever mail drop the thieves ask that it be
sent to, and no questions are asked.

It seems to me that we've got to do something more than what
is being done at the present time in that regard. And I have, I
think, a relatively simple solution and I can't quite comprehend
why it can't be done, and that would be simply to require a per-
sonal appearance with proper photo ID or other means of identi-
fication before we go ahead and allow somebody's mail to be di-
verted. And thereafter, I would suggest that the Postal Service can
send out a confirmation notice to the consumer, asking that he or
she confirm, in writing, the fact that they want their mail sent to
another location.

That, together with a number of the other suggestions that I've
made that are contained in the testimony that I have provided you
with, are things that I would argue ought to be done. There are a
number of other suggestions that are contained in my formal testi-
mony, educational initiatives, for example, to help legitimate mer-
chants and their employees to spot counterfeit cards, strengthening
our efforts to deter deported criminals from reentering the country.

The lead defendant in our case, for example, was deported in
1992, after a previous criminal conviction for credit card fraud, and
he was able to return to this country about a year later under an
assumed identity and I have little doubt that his trip was paid for
on a stolen or a counterfeit credit card or perhaps with frequent
flyer mileage that had been accumulated on a legitimate card.

Most importantly, I would argue that we have somehow or other
got to change the mind set of the credit card and banking indus-
tries and that of the consumer, as well. It seems to me that secu-
rity enforcement is taking a back seat to those who market and use
credit cards. The view seems to be that if we tighten security too
much, if we make it more difficult for the consumer to use his or
her credit card, the card will be used less, that the losses from
credit card fraud can easily be absorbed as long as credit cards are
easy to acquire and to use, as well.

The other thing, of course, that is most disturbing is in terms of
where all of this is going. It's now reached the point where it is no
longer just credit card fraud. Last Sunday night, CBS Television's
"60 Minutes" program reflected upon this particular problem. They
found a staff* doctor at the Mayo Clinic in Rochester, Minnesota
and not only was she the victim of credit card fraud, but they found
a way to tap into her retirement fund, to her doctors investment
account, and they even went so far as to access her daughter's col-
lege fund.

So this whole problem is growing. I would argue that all of us
have an obligation to see what it is that we can do, more than
we're doing at the present time. Certainly, our colleagues in the
law enforcement community, some of whom are here today, have
been most helpful to us and we to them. We've put together teams
of people in an effort to go ahead and aggressively investigate and
prosecute these kinds of cases and we must continue to do that.
With the assistance that we've been getting of late from the credit
card and the banking and the financial industries, with the support
of your distinguished committee, Mr. Chairman, I'm confident that

we'll be able to do a great deal more as people begin to understand
and realize the depth of this problem.

[The prepared statement of Mr. Richard A. Brown can be foimd
on page 198 in the appendix.]

Chairman Leach. Thank you very much, Mr. Brown. Mr. Mark
Richard.

STATEMENT OF MARK M. RICHARD, DEPUTY ASSISTANT
ATTORNEY GENERAL, CRIMINAL DIVISION, DEPARTMENT
OF JUSTICE

Mr. Richard. Thank you very much, Mr. Chairman. At the out-
set, Mr. Chairman, members of the committee, let me apologize for
my late appearance. I was unavoidably detained north of the city.

As Deputy Assistant Attorney General in the Criminal Division
of the Department of Justice, I have principal responsibility for
overseeing the criminal enforcement effort directed at, in particu-
lar, international organized crime and international law enforce-
ment problems. In that capacity, I have the opportunity to deal and
witness both the strengths and the weaknesses of our relationships
within foreign law enforcement agencies and foreign governments
in their efforts to respond to all of the manifestations of inter-
national organized crime.

With your permission, Mr. Chairman, I'd like to just summarize
some points and submit my formal testimony for the record.

Chairman Leach. Without objection, of course.

Mr. Richard. In approaching this problem, I would suggest that
we might analytically look at it in terms of efforts to prevent and
deter, efforts to detect, efforts at investigation, prosecution, and
then punishment. I would suggest we have deficiencies at all levels
along this spectrum.

I would like to highlight one area where I think we are dealing
with new problems, problems that we have never before encoun-
tered and problems that we all have to come to grips with if we're
going to respond to the full dimensions of the problem. That is re-
sponding to crime, organized crime, very sophisticated crime, gen-
erated through or involving foreign institutions, foreign public offi-
cials, and foreign transactions.

And how do we respond to that in the context of the realities
that we are encountering, whether it be in eastern Europe, in Rus-
sia, South America, Asia? These are, I suggest, challenges that are
facing the Nation — in particular, the law enforcement community —
as never before, and I look forward to working with the committee
in responding to those challenges in the years ahead.

We must recognize that with respect to developing countries es-
pecially, we are dealing with oftentimes weak and corrupt judicial
systems, as well as poorly equipped and trained police forces. These
systems and institutions are easy prey for organized criminal
groups.

Similarly, countries facing difficult transitions into democracy
and privatization, coupled with advances in technology, are ripe for
exploitation by organized criminals. The results not only increase
the instability in these countries, but, unfortunately, increase risk
of crime reaching our shores, and our inability to respond to it in
an effective way, not only to deter, to detect, but also to investigate

and, very significantly, bring to justice the culprits. International
cooperation is crucial to combatting this phenomenon.

One of the most important steps we must take in fighting these
international financial crimes is increasing our efforts to assist and
train foreign law enforcement officials. Aii added benefit through
this process is not only the training that we convev and the exper-
tise that we communicate, but it's also the establishment of regular
channels for exchanging information and to identify the members
of institutions that are competent, that we have confidence in, and
that can assist us in developing cases that ultimately we can bring
into court and prosecute.

In this connection, the FBI and the Drug Enforcement Agency,
together with our colleagues at the Treasury Department, are all
involved in extensive police training throughout the world. We
have embarked on a very significant effort in establishing an inter-
national law enforcement academy in Budapest to provide such
training, especially to mid-level managers in eastern Europe.

I would also like to highlight what we have been doing and, in
particular, our efforts to create a network of mutual legal assist-
ance arrangements with eastern Europe and the newly independ-
ent states. Earlier this month, we concluded a formal mutual legal
assistance arrangement with Russia to provide a mechanism for ex-
changing information in such a fashion to enable us to go into court
with the information and produce in the course of prosecution.

We are engaging in negotiations with various other countries in
order to accomplish that. We are also examining those countries
where we can begin to consider enhancing our existing extradition
relationship, as well as to establish new relationships where their
country's judicial system warrants such a relationship.

We have an enormous challenge before us. It is a challenge that
has multiple aspects to it and there is a high degree of urgency to
it because we are, admittedly, all very vulnerable at this time.

Thank you, Mr. Chairman, and I'd be glad to answer any ques-
tions you may have.

[The prepared statement of Mr. Mark M. Richard can be found
on page 207 in the appendix.]

Chairman Leach. I want to thank all of the panel for their excel-
lent testimony. Let me just begin with this problem of international
cooperation. Do you think there is a case for the establishment or
upgrading of Interpol for financial crimes or the establishment of
a new international institution? Does that make sense to you? Mr.
Richard.

Mr. Richard. Mr. Chairman, that is an excellent question and
one that we have been addressing in a variety of fora. It is appar-
ent that we have to establish a more productive exchange base
with these countries. There are several structural options that ap-
pear to be possible for doing this, and the utilization of Interpol is
one of the possible mechanisms that we are considering.

The difficulty, of course, that we have to be concerned about is
not only the rapidity of the communication network, but also its se-
curity, its ability to ensure that the appropriate agencies get the
information in a timely way, and that we have the ability to, in
effect, manage dissemination of information that we put into the
system.

So I can't give you a definitive answer at this time, but it is an
area that we are, I think, collectively looking at and will be exam-
ining very intensely in the months ahead.

Chairman Leach. Does anyone else want to comment on that?

Mr. Brown. Well, I don't know that I'm sufficiently expert in
terms of international matters, but I would tell you that in our par-
ticular case, we found that the members of this ring, this credit
card — ^the stolen credit card and counterfeiting ring, had contacts
in London, in Amsterdam, in Singapore, as well as through many
of the States of the Union.

As a matter of fact, some of our credit cards showed up at the
airport in London. Scotland Yard was involved in our case in help-
ing to put it together.

So I have little doubt, in my own mind, that the problem is not
just a localized problem, by any stretch of the imagination. Cer-
tainly this is one of the reasons why I'm so delighted that we have
the kind of relationship that we do with all the Federal law en-
forcement agencies in Queens County and we're all on the same
page and we all seem to be working together and doing so well.

Mr. Owens. I would just say, Mr. Chairman, that you may be
aware that there is a financial crime section or directorate within
Interpol in Leone and I know they have greatly expanded the train-
ing that they have conducted over the last several years in an at-
tempt to acquaint police agencies from around the world with some
of these new and emerging crimes, and certainly that has been
helpful.

But I think there is also discussion ongoing about whether or not
that might be an appropriate vehicle to facilitate the exchange of
information.

Chairman Leach. How many people are involved?

Mr. Owens. Unfortunately, it's a fairly small section right now,
but I think there is a recognition there and certainly

Chairman Leach. You're talking about half a dozen people.

Mr. Owens. Yes, it's a small amount. But the more important
thing would be the facility to exchange information, if that can be
appropriately equipped.

Mr. Richard. Mr. Chairman, may I?

Chairman Leach. Yes.

Mr. Richard. One of the models that is under consideration is
utilizing a joint FinCEN-Interpol linkage as a possible structure for
disseminating — ^for receiving and disseminating within the U.S. law
enforcement community, financial information abroad.

Like I said, it is a possibility that is being closely examined by
the agencies.

Chairman Leach. Let me ask — and I'll come back to some other
questions — ^but a very precise couple of questions. It's been alleged
that, going to specifics, that the former President of Mexico, Mr.
Salinas, transferred money illegally out of Mexico during the peso
crisis. Is that under investigation?

Mr. Richard. Mr. Chairman, it is difficult for me to comment on
the matter.

Chairman Leach. Excuse me. Let me be precise. His brother.
But go ahead.

Mr. Richard, Again, as you know, the Department of Justice
doesn't identify active ongoing matters or comment on them one
way or the other in a public forum and I'd appreciate not having
to respond at this point. We are in communication with the Mexi-
can Govern ment on the matter.

Chairman Leach. Well, I have some more questions, but I'd like
to turn to Mr. Vento.

Mr. Vento. Thank you very much, Mr. Chairman. I specifically
want to commend my colleague, Richard Brown, the District Attor-
ney of Queens. I know that my colleague will have some comments
but I took a little of your information, "60 minutes," and put it in
the record. I don't think the members necessarily were following
that as closely.

But I would point out in that case that the Postal Service not
only did not use a standard of care, the individual actually that
signed it and got the mail transferred signed the name incorrectly.
Not only didn't they ask for a photo but the common practice is,
of course, to mail back to the former address the fact that there
had been an address change. But very often, that is defeated by the
fact that we do it so late in the cycle that in fact we are not there
to receive it.

In this case, there were other complicating factors; I don't know
what they all are. But one of the issues was that the constituent,
this Minnesotan, not my constituent but one from Rochester, called
the FBI on two occasions and was told that since it didn't involve
a crime of over $50,000 that the FBI would not be involved in it,
would not get involved. Mr. Owens, do you have any comment
about that? Is there some statutory limit or is that a policy deci-
sion?

Mr. Owens. Well, most of the judicial districts have prosecutive
guidelines and tj^ically investigators react to those. Many times
early on in an investigation it is difficult to determine the extent
of the crime. I think in order to respond specifically, I would have
to know exactly what was conveyed at that time.

Mr. Vento. No, I know. I mean, you may want to add to it, but
I want to — it would be likely that someone would say if it is not
over a certain amount, you know. One of the problems they faced,
they called New York said, well, we got all sort of violent crimes,
we haven't got time for this white collar crime type of thing.

Mr. Owens. Typically, though, the U.S. attorneys have a certain
amount of discretion there. I mean, if it is an insidious type of
crime, if personal injury, if a major skill is involved. Sometimes
they will consider. Again, it is very difficult early on in an inves-
tigation to determine the scope of the problem.

Mr. Vento. Well, I mean, these, I think, we are looking at the
tip of the iceberg here.

For one thing, Mr. Chairman, I think one of the problems that
handicaps this entire issue is that banks sell safety and soundness,
they don't sell vulnerability. They don't sell, you know, that you are
going to get electronically mugged. I mean, it has been noted here
and, in fact, of course, what the efforts that were so far this year
was to increase the penalty for the liability to the individual on a
debit or credit card and remove it from the bank so they could mar-
ket it, you know, more broadly. We are not talking about fraud or

someone that did something wrong and that was, fortunately, de-
feated in this committee.

But that's the problem, I mean, that we are facing in terms of
what standard of care should a consumer use? I mean, I don't think
that they know it. I can give some suggestions here.

I recall myself losing a couple of cards including a Bell Atlantic
card, Mr. Chairman. And so I called up the Visa and they took care
of it. And I called up Bell Atlantic, it was late on Friday, they said,
call back Monday. Of course, I suppose they don't have such things
as voice mail and other products that they are so eager to sell to
everyone else, you know! I was a little perplexed. But, I mean, it's
the truth. I mean, that's the East Coast. That's all of you that are
out here. If you lose that card, good luck.

You know, and you point out the rise in this amount like from
1.6, it is maybe one-third of 1 percent, but if it happens to you, if
you get electronically mugged, you know, your credit rating is up
in the air for days. In fact, of course, this particular woman, they
were successful in withdrawing $15,000 from her retirement ac-
count but th-e check went back to her Rochester address, not to
New York. But that saved her from losing that $15,000 but, to me,
it is an indication.

I mean, my question is, how many people have you prosecuted.
How many convictions do we have with regards this? You know, all
of this attention on money laundering and so forth because that's
where the laws are, but nobody is talking about some of the other
issues.

Now, you are suggesting that there are certain inhibitions be-
cause of national concerns and autonomy and so forth but the fact
of the matter is that you know within the context of what we are
talking about here that basically a lot of places are eating this par-
ticular loss. And it is affecting consumers. It is affecting the very
solvency of the system. I would say the validity and integrity of the
entire financial system is what's at stake here.

And how many prosecutions, Mr. Owens, has the FBI been in-
volved with, with this? Mr. Brown, I commend you for putting this
together but this is atypical, I suspect. Mr. Rasor, Mr. Mark Rich-
ard, you commented, I paid close attention, good testimony, lots of
plans, you know, everyone is going to cooperate and collaborate,
you know. How many prosecutions have we got?

Mr. Owens. If I can comment there, I believe my statement gave
some specific figures on prosecution. They were overall figures for
the white collar program. But one of the things it also mentioned
was, and I said in my introductory comments, that we have 22,500
cases under investigation now. We also have in the range of 4,000
cases where the losses exceed $100,000.

Mr. Vento. Do we have underreporting in some of these losses?

Mr. Owens. I'm sorry?

Mr. Vento. A lot of financial institutions, credit card companies,
financial intermediaries eat this?

Mr. Owens. Many times they do.

Mr. Richard. Historically, I mean, this, Mr. Congressman, has
long been a problem in this field of underreporting, and, as you
pointed out, there is an incentive for many of these institutions not
to, if you will, bring this to the surface. Obviously, without regu-

latory requirements there would be a greater incentive not to re-
port it in many instances.

So underreporting, or hesitant reporting, has been a systemic
problem in this area but, if I may, I would just add to Mr. Owens's
comments that in setting prosecutive guidelines, U.S. attorneys
have been encouraged to work with their State and local counter-
parts to draw up a comprehensive response capability so matters
like this don't fall between the cracks, if you will. I am not suggest-
ing they don't, but at least that is not just done in a vacuum and
an effort is made to — to devise a comprehensive district response.

Mr. Vento. I have no doubt about the good intentions of public
servants that are serving with limited dollars in terms of trying to
accomplish what we are doing but, you know, I mean I am just
talking about the reality of what's happening. You know, we have
to at least address that and, you know, anyone can guess right or
wrong in terms of this. That's a synch. But Mr. Chairman, I just
think whatever the tools are that are necessary, I think as an ex-
ample in the international scene is we simply have to set a stand-
ard and say if you don't meet that in Italy or if you don't meet that
in France, we are going to treat it accordingly. You are not going
to be able to deal with us. That's the problem.

And I think we need to step up to it and deal with this because
in my estimation it is the sort of activity that is worrisome, espe-
cially in emerging democracies. I think Mr. Richard's testimony,
Mr. Chairman, is right on in terms of causing an elemental weak-
ness in the entire economy based on that tj^e of activity that is
persisting and we have to, obviously, do something to safeguard it.

Obviously, adequately fimding the State Department and others
that are involved would be a good start. But, Mr. Chairman, I ap-
preciate your tolerance of my going over time.

Thank you.

Chairman Leach. Well, thank you.

Mr. Brown. Might I, with your permission, Mr. Chairman?

Chairman Leach. Of course, Mr. Brown.

Mr. Brown. I alluded in my testimony before to something that
I know troubled me as we were putting this case together and that
is the level of frustration amongst the security people, if you would,
within the banking and credit card industry, with the marketing
people on the other side, all of us, for example, I mean, we get
these preapproved credit forms in the mail. It seems to me that tne
industry wants to make it as easy as it possibly can be for you to
use your card or me to use my card. I mean, I've heard stories for
example that Gold cards are not to be challenged by cashiers in
terms of identity of a particular individual, simply to allow the card
to be used in commerce.

And what seems to be happening here is that, you know, the the-
ory is, you know, if one card out of 10 is counterfeit or stolen, so
what, we'll go ahead and absorb it in the nine other cards that are
used to make purchases. And that is terribly, terribly frustrating,
I think, to all of us. I think there has got to be a mucn greater bal-
ance within the industry as between security and fraud control as
against those who market the cards.

Mr. Vento. Mr. Chairman, I would point out but for the fact that
this Congress said you can't send these cards out through the mail

without application or without formal financial relationship, they
would be coming in the mail unsolicited. But Congress decided that
they had to bar that practice.

Chairman Leach. Ms. Velazquez.

Ms. Velazquez. Thank you, Mr. Chairman.

Yesterday, my oversight committee held a hearing on counterfeit
and I didnt have time to ask a question and I would like maybe
to see if any of you has done any work with Interpol?

Mr. Rasor. In terms of actually having investigations conducted?

Ms, Velazquez. Yes, financial. International financial crimes.

Mr. Rasor. To some extent, yes.

Ms. Velazquez. Have you ever heard anyone say that Interpol
has a problem with information leaks?

Mr. Rasor. No.

Ms. Velazquez. OK, thank you.

Well, now I would like to ask some questions to my district attor-
ney from Queens. I just also would like to thank him on behalf of
the New York Congressional Delegation that sits on this panel and
particularly to acknowledge the creative way in which he has been
fighting financial crime in the county of Queens despite the limited
resources and assistance that he is getting from the Federal
Grovemment.

Mr. Brown, I would like to ask you, are there financial crimes
other than credit card fraud that pose significant problems for your
county?

Mr. Brown. I think the biggest one is one which has been al-
luded to here today, and I am sure in your hearings of yesterday,
that is the basic money laundering problem. I mean we, in Queens,
for example, have what has often times been called the cocaine cap-
ital of the world in the heart of Queens, Jackson Heights, Corona,
East Elmhurst, areas such as that, a portion of which you rep-
resent, and we have been spending a great deal of time and a great
deal of effort, together with all of our collea^es in the law enforce-
ment community in targeting narcotics trafficking.

Last year, as a matter of fact, over a ton of cocaine was taken
off the streets of Queens County and, of course, in addition, we
have the problem that arises out of the presence within the county
of Kennedy Airport where large quantities of narcotics come in and,
as a matter of fact, last year I was told by Customs that the
amount of heroin seized, heroin now, at Kennedy Airport was
greater than in all of the other airports of the United States com-
bined. That perhaps gives you some idea of the magnitude of the
problem, of the narcotics problem.

But it has only been recently, it seems to me, that we have been
reflecting upon the fact that all of this — all of these narcotics are
coming in and they are being sold on the streets of not only our
communities but throughout the entire United States and, of
course, the money has got to go back out. You know, we in Queens
have had just — I was iust loolcing the other day at the number of
seizures that we have had of money, and I have a little list of them
here, $2.1 million in a Jamaica apartment, car stops $210,000,
$199,000, $800,000 was seized on a street in Corona, in your dis-
trict, last August. November 9 we confiscated $1.3 million from a
Bayside car stop which led into an apartment. We seized, just off

the Grand Central Parkway near LaGuardia Airport, only recently,
$478,000, and 2 weeks ago we got $514,000 out of a car.

We, out of Queens County last year, particularly out of Kennedy
Airport, seized $10 million. We, the law enforcement community.
Federal, State, local. As a matter of fact, just earlier this month,
we announced the seizure of $4 million in cash at Kennedy Airport
that had been secreted in a shipment of household goods bound for
CaH, Columbia. So, obviously, the whole issue of money laundering
is one that all of us are taking very, very seriously and trying to
get a handle on.

Ms. Velazquez. And one way that that money is sent abroad is
through monies transmitted?

Mr. Brown. Yes.

Ms. Velazquez. What recommendations, Mr. Brown, do you have
for addressing the problem of money launderings in Queens or in
any other part of the Nation?

Mr. Brown. Well, one of the things I think that, again, troubles
us is the fact that while we have registration now of these tele-
communication entities, if you will, that that registration does not
flow down to the subcontractors. Just, for example, if I had a real
estate license, everybody that worked for me would have to have
a license off my license. That apparently does not happen imder
your existing legislation. So I would argue that one of the things
we could do is, we can go ahead and think in terms of registering
the individuals beneath the major player in terms of those monies.

Of course, the entire problem is one, again, that so often a local
prosecutor is just ill-equipped to go after without being part and
parcel of a team, if you would. Just as we have a Federal High In-
tensity Drug Trafficking Team [HIDTA], for example, that has re-
sponsibility for narcotics trafficking in particular areas, the high-
intensity drug enforcement units that are combining people from
all of law enforcement, the DEA and the FBI and joint task forces,
the NYPD, and so forth. We get ourselves involved in them, we do
a lot of eavesdropping warrants for them, and so forth. I would
argue that that concept, that basic team concept, ought to be ex-
tended to the area of money laundering as well. With that and, ob-
viously, some funding for that kind of a team approach, I think we
can get a much better handle on the problem.

Ms. Velazquez. Thank you, Mr. Brown.

Mr. Chairman, I would like to ask unanimous consent to insert
my opening statement into the record.

Chairman Leach. Of course, without objection.

Mr. Royce, and I apologize I skipped over you in the order.

Mr. Royce. Thank vou, Mr. Chairman.

I just wanted to ask, in a previous committee we heard from Ar-
nold de Borchgrave who gave testimony that FBI Director Louis
Freeh had cited that Russian organized crime has established rela-
tions with counterparts in 29 countries, and operates in 17 U.S.
cities and in 14 states here, and I would like to ask Mr. Owens and
Mr. Rasor to what extent has Russian organized crime set up oper-
ations or contacts in the United States, and what is the FBI and
Secret Service doing to monitor these groups or close them down,
and how dangerous are these groups to American citizens, more

specifically how dangerous are they to our financial system now
that they are operating in the United States.

I brought up earlier the question of the Citicorp system which
was raided fi^om St. Petersburg, and just quoting fi-om the Wall
Street Journal at the time, they said, Citicorp's system is so ringed
with security that breaking in like a computer hacker is considered
by industry experts almost impossible. So it looks like more than
a simple hacker problem to get past that system and transfer $12
million.

So I guess those are my questions, and then what could we do
as legislators to help you, in your duties, to protect American
citizens and protect our financial systems from foreign criminal
activity?

Mr. Owens. It's a very broad question. I will make an effort to
address some of the points. Certainly with regard to the specific
numbers that the Director testified to, I won't attempt to address
that, I will defer to his testimony on that.

With regard to our efforts conducting specific investigations of
these groups, there have been a number of successes. There are a
number of identified groups in the United States that are involved
in various types of financial crimes as well as extortion schemes,
other things that typically are addressed under our Organized
Crime Program, and we do have initiatives underway both within
our White Collar Crime Pro-am and our Organized Crime Pro-
gp^am to address these Russian g^roups. So with regard to that,
there have been successes.

With regard to the Citibank case, you had asked earlier, too,
whether or not there have been any convictions there. There have
been four convictions to date in that case, and there still are a cou-
ple of outstanding cases. One individual is under arrest in London
and is awaiting extradition. So that case is ongoing.

With regard to the vulnerability there, and I am certainly not a
banking expert, and I only speak from a law enforcement perspec-
tive, but I will say that the Bank Fraud Working Group, which has
been discussed certainly in the prior panel, has had some consider-
able discussion about what the vulnerabilities are. Obviously, from
a law enforcement perspective, we are concerned about that, too. I
don't think there are a lot of specific examples of intrusion, success-
ful intrusions like the Citibank case, fortunately, so I don't know
the full extent of the vulnerability. But within the Bank Fraud
Working Group, we have established a subgroup which the FBI
chairs looking at that very issue.

Mr. ROYCE. Let me ask you also a followup. In other committees
we have learned that there is an extreme capital flight from Russia
and other East European countries to the west. Can you tell us
where this capital is coming from? Is it monies that have been sent
from the United States or the IMF, or is it money that is being
laundered from illegal activities, or do we know the sources?

Mr. Owens. Well, I would say it is still being looked at. I think,
as well as coming here, there is a lot that's going the other way
as well. So I don't think we know the full extent of that, yet, nor
do we know the purpose, whether it is dispersing ill-gotten gains
or whether it is for some economic purpose to convert rubles to dol-
lars or whatever, all that is still being looked at.

Mr. RoYCE. If I could just ask one last question of Mr. Richard
because he brought up the ILEA. Could you tell me, this new orga-
nization, whether it has helped U.S. authorities to track or detect
money laundering or other financial crimes coming from Russia or
other former Eastern Bloc countries?

Mr. Richard. ILEA is a training academy. It has not focused ex-
clusively on money laundering, but it has, it is my understanding,
engaged in some sponsorship of money laundering programs, train-
ing progn'ams there. It is designed to provide mid-level managers
with basic appreciation of the problem and how their experience
has suggested one can respond to it. So I am not sure that it is
easily translatable into actual results in responding.

Mr. RoYCE. I bring up these questions because when Russian
democrats are here it is of great concern to them, the issue of
money laundering, and what is happening in terms of the flight of
capital from Eastern Europe, from Russia, and I am just trying to
get some handle on what we do know.

Mr. Richard. If I may just respond, you had asked about sug-
gested legislative responses to the problem. As you may recall, the
President did direct the Attorney General to establish an inter-
agency task force to look at just this question: Whether new legisla-
tive authorities are needed to respond to any aspect of the problem.
Under her direction, we are in the process of examining that across
the whole spectrum, and I anticipate that in the near future we
will be suggesting some legislative proposals to address the
problem,

Mr. RoYCE. Thank you.

Thank you, Mr, Chairman.

Chairman Leach. Thank you very much, Mr. Royce,

Before bringing this to a halt, I want to ask a couple of questions
that go to kind of a premise of Mr. Rasor. Mr, Rasor made some
comments earlier on about the good guys are smarter than the bad
guys. You know, when self-interest is at stake and criminal intent
is imderway, I am not always convinced that's the case. We have
an Office of Technology Assessment, for example, report that indi-
cates that it is not at all clear that we have a very good handle
on how to use money transfers, and how criminal elements do. It
is even sometimes suggested that technologically law enforcement
may be behind the curve. Do you suggest that's conceivable?

Mr. Rasor. Mr, Chairman, financially, law enforcement is behind
the curve and also probably in the ability to have the availability
of equipment that the bad guys can routinely get either by legal
or illegal means. But I think in relationship to being smarter than
the bad guys and using that philosophy to stop the problem I think
that we are smarter if we spend the time, as I mentioned before,
to understand our systems and realize — and this comes to a ques-
tion that was asked a moment ago too — how many people are you
arresting?

We could never arrest enough people to stop this problem — col-
lectively we couldn't do that.

The repetitiveness of the problem, the ability of the criminal ele-
ment to analyze the system and know where those weaknesses are
and then respond to it is where the problem is.

From a technological standpoint, almost every one of these
crimes have a systemic or technological fix attached to it once you
break the crime down, see what made it happen. Now it's the abil-
ity of things like this committee's hearings and the education proc-
ess to allow those fixes once they are detected to occur that is going
to take us over the hump.

Chairman Leach. Let me just say that I'm very impressed with
the case Mr. Brown has brought, but I also suspect in his jurisdic-
tion that you are dealing with a percentage and I suspect there's
no great feeling that you have whether you are dealing with 5 per-
cent of the problem or 75 percent of the problem. Nationwide, when
I look at the letters that come into my district on the Nigerian
fraud scheme. I have to be rather impressed that there are an
awful lot of people involved and not an awful lot of arrests, but
that's just a suspicion. I mean this is rampant.

What is impressive about it is that once there is notification it
ought to stop instantly. So one of the questions is, what kind of
communications are being made to consumers? I would think every
bank in America ought to be sending their customers a warning
about it.

Then we have this problem, does the bank want to make people
think things are a little shaky? I don't know.

I am not terribly impressed that we have got a handle institu-
tionally on the problem in our country or abroad. I mean, clearly
we have some of the very best people in the world. Clearly we have
done more thinking about it probably than anywhere else, but I am
not convinced we have got the strike force capacities here. I am
also not convinced we have got an international setup abroad that
people trust and have confidence in and want to use. That is one
of the reasons that I think that a financial crimes entitv ought to
be the subject of an international treaty. We ought to be moving
in that direction with some sort of entity that is of comparable sig-
nificance to Interpol.

If these numbers are valid, the types of crimes we are dealing
with are of a far larger magnitude than Interpol deals with, except
that this is technically under Interpol to a degree now. Mr.
Richard?

Mr. Richard. May I respond, because you raise a problem that
is a real one, and one that we are coming to grapple with. The Ni-
gerian situation is very illustrative of the problem.

Several years ago when we had a higher degree of confidence in
the commitment of the Nigerian government to respond to this, we
engaged their institutions and came up with an agreement for pro-
viding mutual legal assistance in order to respond to the Nigerian
drug problem and the Nigerian fraud problem and what have you,
and we negotiated an agpreement which we had hoped would facili-
tate the collection of information and lead ultimately to the appre-
hension, whether it be in Nigeria or the United States, of the
culprits.

Frankly, with changing political situations there and the treaty
is before the Senate Foreign Relations Committee and we have
asked that it not proceed at this moment because of a change in
political will, as we perceive it, there.

We are in effect dependent to some degree on the cooperation of
the foreign government to assist us in collecting the evidence and
apprehending their nationals who keep on bouncing back and forth
between countries.

Where there is no willingness, no capability, no will, no commit-
ment to address this on an international level, it becomes an ex-
tremely difficult problem to respond to.

Chairman Leach. Let me just conclude by saying I am very im-
pressed that what we have here is the impersonalization of crime —
that is, the idea that instead of having someone with a gun at
someone's face, that one uses a number, potentially from another
city, with a system that provides resources, and that we have taken
the eye off the ball because it doesn't seem as dramatic, and then
we are numbed by the numbers.

We all know around here that the word "billion" lacks meaning
and so when you get into those figures and then you get into mul-
tiples of a billion and then this concept that there was half a tril-
lion in some sort of illegal money flow is a figure that is, you know,
quantitatively more mind-boggling, but the numbing aspects of the
numbers I think mean we are going to have to put a lot more per-
sonal attention to figuring it out and possibly consider some very,
very new institutional arrangements.

I am personally one as we think about the budgets and the dif-
ficulties of it, it's one of the reasons why again I come back — I
think the intelligence communities are going to have to be at a
much higher degree of priority involved in this process, but that is
just a personal view.

Anyway, thank you very much. I appreciate all of your testimony
and your dedication to puolic service.

Recess for 2 minutes for the new panel to take its seats.

[Recess.]

Chairman Leach. The committee will reconvene.

Our three witnesses on the final panel of private witnesses are
from the American Bankers Association, Boris F. Melnikoff, who is
Senior Vice President of Wachovia Corporation; then from the Cen-
ter for Strategic International Studies, Amaud de Borchgrave — and
we welcome you, Amaud; and then a private banking consultant,
Mr. Clifford Brody.

Before beginning, I want to extend my condolences, and I hope
I am not mistaken in this from reading an obituary in the New
York Times. Your wife's father died, Arnaud? I am sorry to hear
that.

Mr. DE Borchgrave. Thank you.

Chairman Leach. Mr. Melnikoff.

Mr. Melnikoff. Thank you.

STATEMENT OF BORIS F. MELNIKOFF, SENIOR VICE PRESI-
DENT, WACHOVIA CORP., ON BEHALF OF THE AMERICAN
BANKERS ASSOCIATION

Mr. Melnikoff. Good afternoon, Mr. Chairman and members of
the committee. I am Boris F. Melnikoff, as introduced by the chair-
man, with Wachovia Corporation and I also serve as the ABA's
Money-Laundering Task Force Chairman.

The ABA has been asked to discuss money-laundering trends and
other t3T)es of financial fraud, both domestically and internation-
ally, and we welcome this opportunity to outline to the committee
the banking industry's efforts in deterring all types of financial
fraud. ABA believes that our response to this problem has been
strong and an ongoing effort which clearly has been successful and
we hope to spell that out a little further in my comments.

The committee has indicated concerns with the threat of orga-
nized criminal groups to the international financial system, and
while the ABA snares their concerns, we also must emphasize that
the U.S. financial industry addresses fraud whether committed by
groups or individuals on an ongoing basis in a variety of ways.

The industry is working diligently with government counterparts
to ensure that the financial community nas all the appropriate
tools to combat all types of bank fraud.

The committee seeks comments on various types of financial
crimes associated with organized groups. However, many of the
crimes can occur on a random basis so trends will be the same re-
gardless as to who commits the crimes.

For example, the major crimes committed against banks and
other businesses, one, is check fraud; two, credit card fraud; three,
telemarketing fraud relating to drafts.

The survey, which was conducted by the ABA, told us that check
fraud can be perpetrated with forged signatures, forced endorse-
ments, check kiting, or counterfeit checks. This may mdeed occur
through organized efforts but it's not limited to those activities.

We have such a thing known as "friendly fraud" which actually
involves a legitimate holder of the account, so to address the prob-
lem the banks have, among other things, indicated a need to edu-
cate the corporate customers in their responsibilities to help us pre-
vent the frauds.

Many systems, both software and procedurally, have been insti-
tuted by the financial industry and shared with the corporate cus-
tomers in order that we may reduce that segment of check fraud.

The ABA continually provides information to members on how to
protect against being a victim of fraud but vigilance is the key. As
we continue to discuss the industry's response to fraud, it must be
emphasized that there is one common thread to all the deterrents,
and that is what you have heard today: know your customer.

We will amplify this concept later on in the statement.

Mr. Chairman, ABA generally does not believe that the enact-
ment and updating of banking and criminal laws will be a better
method to combat fraud throughout, but we would be happy to
comment on any specific proposal that the committee may be con-
sidering including the bill you are introducing today, Mr. Chair-
man, which we feel is necessary at this time.

Money laundering and the U.S. response — the ABA has long sup-
ported the efforts of Congress and the U.S. Government in its drive
to address money-laundering activity throughout the world. The
ABA was pleased to support the Money Laundering Suppression
Act of 1994, which was enacted to improve the regulatory process
covering the Bank Secrecy Act. Due to that legislation, FinCEN has
successfully reduced the size of the currency transaction report and
are close to further streamlining the whole entire cash-reporting

process, which I might add, we personally thank FinCEN im-
mensely for that help.

All of these initiatives will assist the industry and the govern-
ment in their efforts to help stop money-laundering by refocusing
the efforts from routine reporting to suspicious transaction report-
ing and FinCEN deserves much of the acclaim for spearheading the
regulatory burden reduction process that benefits both the bankers
and law enforcement.

To continue on the point of reducing the amount of cash reports,
ABA would like to re-emphasize the partnership developed in the
past several years between the government and the banking indus-
try. This alliance needs to be highlighted because the same rela-
tionship is not common nor found in many foreign countries.

In the international arena, the Financial Action Task Force
serves as forum for ideas and recommendations on how to elimi-
nate money-laundering activities not only in our own country but
in other neighbors throughout the world. FATF is to be commended
for its dedication to the worthy goal and it is imperative that the
private sector lend its expertise and energy to increasing the obsta-
cles for narcotic traffickers and other criminals who illegally use
our financial institutions to move their ill-gotten gains.

The ABA has supported these efforts but as we previously men-
tioned, the record of our international counterparts have been
mixed at best, and I migl'it add from personally attending the meet-
ing in Paris last month, in talking to some of my associates there,
what was alluded to earlier this morning with respect to the "know
your customer" rule in foreign countries, I think you will not find
that necessarily true in all foreign nations that attended the FATF
meeting. Their main concern obviously was receiving deposits.

The ABA stands ready to continue its decade-long involvement in
educating bankers and other private sector representatives on the
need for compliance and vigilance with money-laundering laws and
activities, and we have worked with FATF and its members so that
one day we can all trumpet the end of money-laundering and finan-
cial institutions everywhere will celebrate a great victory.

The trends in money laundering must by definition be discovered
by law enforcement and State and Federal bank regulators since
those entities are better equipped than bank officials to discover
new forms of criminal activities and to distribute this information
to all concerned parties.

The government has been working toward an improved alliance
with the private sector to share information on new trends and
schemes and we are optimistic that this will continue.

Mr. Chairman, I would just like to briefly share with you two ex-
amples of how the banking industry has accepted and worked very,
very closely with law enforcement.

A financial institution employee contacted the Financial Task
Force in Oklahoma concerning a new account which was receiving
wire transfers from California and then the money being with-
drawn in U.S. currency. Each wire was approximately $50,000.
This information uncovered a theft ring that had stolen almost $4
million in microchips from a business in Oklahoma.

Another interesting situation was a bank compliance officer
called the Financial Task Force when he became suspicious that an

elderly gentleman began taking large cash advances on a number
of credit cards. Because of this call, an investigation ensued and
uncovered fraudulent telemarketing schemes in Las Vegas, Nevada
and fortunately prevented the gentleman from losing everything.

Additionally, many, many banks in this country work very, very
closely with all law enforcement agencies with respect to maintain-
ing certain accounts when necessary as Operation DERAILED,
which was addressed earlier, and many other operations — Oper-
ation Polar Cap, Operation Dinero— the banks have played a sig-
nificant role in assisting law enforcement in tracking records, mon-
ies, and things of that nature, so the banks in that regard have
done I believe an outstanding job.

Countermeasures, another area we have been asked to cover,
concerns what countermeasures have the U.S. financial institutions
developed in order to both comply with regulatory responsibilities
and to develop appropriate proactive responses to money launder-
ing while the United States does not now have a regulation in
place, although we expect one in 1996, the ABA has long supported
the concept of formalizing and "Know Your Customer."

In a survey that ABA has conducted, over 86 percent of the re-
spondents have a program at their institutions in place that will
assist us in that piece of legislation in "Know Your Customer," So
the industry is trying to be ahead of the curve. We are putting the
horse before the cart now, rather than the cart before the horse
and 86 percent of the industry is there now, so we are excited and
hopefully we'll have 100 percent before any legislation is enacted.

Recommendations as the committee continues to review its global
financial crimes, how best to address fraud, our association would
ask that you consider the level of resources available to law en-
forcement in the United States. Due to the lack of funds in many
agencies, frauds are committed under certain thresholds. Example
mentioned earlier— $100,000, New York City, other cities, $50,000,
$25,000. In theory, these frauds can go unprosecuted and individ-
uals will walk, so we urge the committee to take and give that
some consideration.

In conclusion, the American Bankers Association has long advo-
cated adherence to "Know Your Customer" principles as a means
to deter fraud and protect the banking industry.

I might add, Mr. Chairman, that the industry in this regard has
spent and invested huge amounts of money in artificial intel-
ligence, all kinds of profiling techniques to profile and monitor ac-
counts to reduce the exposure to credit card fraud, and things of
that nature.

A lot of research is being done now through techniques to iden-
tify and positively identify people. I see that coming in the next 5
to 6 years that we will have the technology and the ability to iden-
tify a customer not by account number, not by a PIN number, but
by some part of the anatomy and I suggest to you that that will
become the retina in the human as positive means of identifica-
tion — so there is an awful lot going on and we are just proud to
participate and we thank you for me opportunity to be here and
I'll be happy to answer any questions.

[The prepared statement of Mr. Boris F. MelnikoflF can be found
on page 218 in the appendix.]

Chairman Leach. Thank you, Mr. Melnikoff.
Mr. de Borchgrave.

STATEMENT OF ARNAUD DE BORCHGRAVE, DIRECTOR, GLOB-
AL ORGANIZED CRIME PROJECT, CENTER FOR STRATEGIC
AND INTERNATIONAL STUDIES [CSIS]

Mr. DE Borchgrave. Thank you, Mr. Chairman.

About 4 years ago, Mr. Chairman, a wealthy friend of mine in
New York who has very good contacts in Moscow was called by
these Russian friends asking for help when they got to New York.
When they got to New York, they wanted contacts in Nassau, Ba-
hamas, as they realized that my friend also had a residence there.
He called the Swiss banker in question and a week later got a call
back from the banker who said, do you realize what your Russian
friends wanted? And he said, yes, I assume they wanted to open
a bank account. He said, do you know for how much? He said, I
assume it was for a few million. He said, no it was $2V2 billion and
that was turned down by the Zurich headquarters of the Swiss
bank.

A few weeks later, I was recounting this anecdote to a Swiss
banker in the south of France headquartered in Monte Carlo and
he said — ^he volunteered the following story. He said, well the day
before yesterday, I had a walk-in, a Russian walk in without any
introductions at all and he wanted to deposit $400 million but he
wanted to make sure that it was imtraceable through a variety of
offshore accounts.

These two incidents, of course, grabbed my attention and led to
the program that we have started at CSIS, which we call Global
Organized Crime. It is chaired by Judge William Webster, the
former DCI and former FBI director. We have a steering group
made up of 30 people from law enforcement, corporate security and
intelligence, all very prominent figures. This, in turn, has spawned
seven task forces that deal with everything from money laundering
to coimterfeiting to nuclear materials smuggling to illegal alien
smuggling, cybercrime, cyberterrorism, and all these other things.

After 18 months on the job, there is no doubt in our mind what-
soever, and I am talking about 150 people involved, that the di-
mensions of transnational crime, which of course include money
laundering and counterfeiting present a far greater international
security challenge than anything Western democracies had to deal
with during the cold war.

President Yeltin, as I think we all know by now, has described
his own country, which still spans 11 time zones, as the biggest
mafia state in the world. He called it the superpower of crime. He
has accused his own officials of turning a blind eye to what is going
on to the criminal penetration of the MVD, the very organization
that is tasked with fighting organized crime.

As the head of the German BKA pointed out right here in Wash-
ington a year-and-a-half ago, the collapse of the Soviet Union also
brought about a lethal mix of intelligence services, banks and orga-
nized crime.

I personally have investigated and, in many cases, witnessed
what Russian thieves-in-law or mafia dons were doing all over the
Western world. North America and Latin America, carrying, as I

think we have all heard these stories, but I have witnessed them,
carrying from $5 to $10 million around in $100 bills in suitcases
and buying choice properties all the way from Buenos Aires to Ber-
lin and from Marbella, Spain, to Monte Carlo, Monaco. Tiny, little
Cjrprus receives 100,000 Russian visitors a year at the present time
versus about 200,000 to the United States.

We can see a growing crisis of law and order over an increasingly
large part of the globe. The collapse of the Soviet Empire has led
to a breakdown of discipline generated by a fear that we no longer
fear but this has in turn been replaced by another fear that people
like Pat Buchanan are tapping into and that is the fear that the
human being is gradually becoming redundant.

There are today 820 million unemployed in a world of 5.7 billion
people and with almost 100 million new babies a year, 40 percent
of them born into the megaslums of the developing world and with
an average age of 21 or less, we have entered, as we see it, an era
of rising inequities between nations and within nations. There are
also now the haves and the have-nots of the information age.

In our banking sector alone, an estimated 450,000 employees will
be laid off in the next few years, displaced by megamergers and
displaced by on-line banking which is expected to shut down half
the branches in this country. And this new cashless society will
have created a ready-made army of disgruntled people, potential
recruits as purveyors of inside information.

Our GOC study at CSIS has also established a direct correlation
between the exponential growth of transnational crime and the
computer revolution. The traditional prerogatives of national sov-
ereignty have not only been challenged in cyberspace, as I think we
all realize, they have ceased to exist. In order to test, and we had
a meeting this morning, all morning, of the President's National
Security Telecommunications Advisory Committee and the head of
DISA was there, in order to test the security and vulnerability of
DOD's communications systems, the ASSIST center of DISA, the
Defense Information Systems Agency, was tasked to penetrate the
Pentagon's worldwide operations. They did not use sophisticated
software, but software available to anyone, namely SATAN,
R-BONE or ROOTKIT on INTERNET.

And the long and the short of it is, Mr. Chairman, is that they
managed to penetrate 96 percent of their own systems that had
been targeted. Only 4 percent realized that they had been success-
fully penetrated and of those 4 percent, only 5 percent of the 4 per-
cent did report this to superior offices.

Substate or nonstate criminal actors are using the same meth-
ods. Although not verifiable, briefers have told us in off-the-record
sessions — and these are briefers representing industry and govern-
ment — that at least 400 of the Fortune 500 corporations have been
penetrated and, again, only 5 percent were aware of these penetra-
tions.

In many instances, the objective was passive economic intel-
ligence collection, setting off few, if any, alarms. We have no early
warning capability in cj^erspace and in mock information warfare
scenarios, we have seen the telephone signalling systems and
switches can suddenly curdle, jamming communications, that trad-
ing on the New York Stock Exchange can be paralyzed, that auto-

mated teller machines can go haywire, crediting and debiting erro-
neous amounts at random, that the Social Security System and its
1,325 field offices could no longer function and that air traffic con-
trol centers and railroad and shipping computers can be disabled
quite easily.

The order of magnitude of transnational crime, as our experts
have put it all togetner, and we deal with foreign intelligence serv-
ice as well, the order of magnitude is staggering. The National
Criminal Intelligence Service in London has upped its estimate of
annual money laundering to about $1.3 trillion a year. NCIS in
London receives about 12,000 confidential money laundering tips
every year from public spirited citizens but not one of these has yet
led to a conviction because the evidence simply vanishes in
cyberspace in nanoseconds.

PDD-42, which we are all aware of that President Clinton issued
last October was designed to come to grips with transnational
crime and money laundering. It is at least a good beginning but,
in our judgment, it is woefully inadequate in that it assumes that
we can negotiate the closing of some 50 major money laundering
centers that span the globe, many of them tiny island nations, and
if unsuccessful then punish them by taking them out of the U.S.
financial loop. There is no such loop. It is now a global one but law
enforcement still has to stop at meaningless borders.

The Seychelles will give anyone depositing $10 million a diplo-
matic passport; that is, immunity from prosecution. A St. Kjtts
passport can be had in return for the purchase of a $150,000 condo
and I, personally, know several American citizens who have given
up their citizenship and who are now citizens of St. Kitts in ex-
change for $150,000 in order to evade taxes.

We must be prepared to address the many new issues raised by
the development of cybercash, new payment systems such as stored
value cards or electronic wallets. Ron Noble, the outgoing Under-
secretary for Enforcement at Treasury said we have to be con-
cerned as an organization to come up with principles which recog-
nize that technologies could pose a threat but do not define them
in such a way that you are dated as soon as you publish them.

Law enforcement officials feel strongly that the developers of new
financial technologies should think about their criminal potential
before they launch them so that governments do not have to clamp
down on them afterwards with draconian rules. Safeguards now
being discussed against the misuse of electronic stored value cards
could include limiting their maximum value or restricting their use
to certain closed systems.

The professionals on our own CSIS task forces believe that elec-
tronic financial crimes are now the principal threat to the world's
financial infrastructure. We are facing a new breed of transnational
criminals with high tech methodologies and that was discussed all
morning today at these off-the-record meetings with the top experts
in this country.

Individuals and corporations are only dimly aware of the risks.
Electronic commerce is expected to reach about $3 trillion a year
in 4 years' time when on-line banking will become the norm and
checkbooks the exception. Our real assets, Mr. Chairman, are in
electronic storage, not in Fort Knox, including most of the propri-

etary and intellectual property. And in this global electronic envi-
ronment, there are no cops to protect you, your assets or your se-
crets or your reputation in personnel or court records that can be
doctored by remote control.

As "60 Minutes" demonstrated last Sunday, transnational crimi-
nal gangs are now routinely stealing the identities and retirement
accounts of American citizens. We all know that successful counter-
feiting is also a global plague. If 14 out of the 15 French banks
forewarned that it might be a forgery guaranteed the authenticity
of a $100 bill, we know that the superbill is not a journalistic
fantasy.

Russians now hold tens of billions of dollars in $100 bills, obvi-
ously not all counterfeits, and about $100 million, as you well
know, in $100 bills is shipped daily to Russia where they are
bought for rubles. Topic A among Russians these days is what the
new $100 bill will do to their hoard of old bills. The U.S. embassy
hotline tells them that they have nothing to worry about, that the
old bills will be valid tender for the indefinite future, but there is
no question that regimes such as Iran, Libya, and Iraq have a vest-
ed interest in destabilizing confidence in the dollar. They have also
been using counterfeit dollars for subversive purposes. The global
reach of the Superbill is yet another example of how law enforce-
ment and intelligence have no alternative but to pool, not share,
their resources.

You might ask, Mr. Chairman, what does an organization like
CSIS hope to do about global organized crime. First of all, we have
established, and this was confirmed again this morning, there is no
central clearinghouse in this city for information about activities in
all fields of transnational crime. CSIS has collected and continues
to collect this information from a wide variety of sources all over
the world. Our mandate is quite simply to act as a catalyst to raise
the level of awareness that hopefully will provide the building
blocks for the kind of high tech transnational cooperation and legal
structures that are essential in order to level the playing field be-
tween law enforcement and transnational crime syndicates.

Countries under attack including all the democratic nations of
the world have no choice but to pool their resources to create the
kind of countervailing force that transnational crime syndicates
will have to take seriously. And, unless that happens, global orga-
nized crime will continue to supplant national entities and under-
mine the world's financial infi-astructure.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Amaud de Borchgrave can be
found on page 301 in the appendix.]

Chairman Leach. Thank you.

I think I should breathe a collective sigh, if everyone present will
sigh.

Mr. Brody.

STATEMENT OF CLIFFORD L. BRODY, PRESIDENT, CLIFFORD
L. BRODY ASSOCIATES, INC.

Mr. Brody. Mr. Chairman, I am pleased. I am, indeed, honored
to be asked to testify before the committee today on the whole

question of money laundering, and the role of Russian banks and
Russian institutions fostering it.

I have prepared written testimony, and I ask that it be included
in the record.

Chairman Leach. Without objection, all the statements will be in
the record.

Mr. Brody. And, with your permission, I would like to digress
a little bit from my prepared oral statement as well.

Chairman Leach. Please.

Mr. Brody. I do benefit from the excellent, and I mean excellent,
testimony of the speakers that have appeared before me today,
both on this panel and on the preceding panel, and it has caused
me to think a little bit about the recommendations I have made
which I stand by, and also to want to comment a little bit on the
framework for not only what is going wrong, but how we might ad-
dress it because that seems to be the problem, number one.

My recommendations were, and still are, that the U.S. Govern-
ment and other governments sit down somehow in an effective sort
of way with the Russian Government and Russian Central Bank to
cause the Central Bank of Russia to make available on a confiden-
tial basis to banks and other appropriate agencies those organiza-
tions inside of Russia that are legally licensed to have accounts
outside of Russia. That builds on the whole question of, know thy
customer. We can't know who all the customers are from Russia,
but there is a licensing system, it is formal, it is maintained, and
it should be available.

I stand by my second recommendation, which is that the Con-
gress secure a commitment of some sort from the executive branch
to act with other governments to begin focusing on some specific
rules of the road, be they legislative or regulatory or central bank
in nature, governing the use by banks of all kinds of stored-value
card technology, particularly as it is used for transferring or trans-
mitting value, money, on cards.

I also believe that this committee should sit down carefully and
quickly with the banking industry to define where the common
ground is between the committee and the Congpress and the indus-
try to make sure that stored value on these cards has some way
of telling the institutions that process this value where large values
have come from. I will come back to these recommendations in a
moment.

My informal comments, they do digress a little bit from my oral
statement, begin with the statement that Mr. Royce made at the
beginning of the hearings today. Mr. Royce's statement struck me
not only as correct factually, but also well-structured in the sense
that he has correctly identified the nature of the problem, the par-
ticipants in the problem, essentially the cause of the problem. If
anything, the statistics of a more recent nature buttress the points
that you have made, Mr. Royce.

I believe that this is happening because lawlessness really is
rampant in Russia and some of the other former Soviet Union Re-
publics. I think it is a special form of lawlessness that we are not
accustomed to seeing in the United States, nor do we find in West-
ern Europe. It is an individual sort of lawlessness. It is an institu-
tional form of lawlessness, but it is reflected in the activities of peo-

pie who are simply players in a system that is unlike ours. These
people, particularly from institutions or from governments or from
the central bank of Russia, often say that they are speaking for
their institutions, but they are really not. They are speaking their
hopes, their aspirations, particularly the ones that would Tike to
see the system improved, but they really do not have the cachet of
their organizations and, sometimes, even at the top, they do not
even know what their organizations are doing.

As a result, if we bank on the signature or the word of a Russian
banker, or a Russian Central Banker, or a Russian Minister, or
even a Russian Parliamentarian, we really do not know if he
stands for his institution or whether the institution will deliver. In
fact, the experience is that somewhere in that institution there are
people who are corrupt and who will use the name of the institu-
tion for their own financial and personal gain.

I believe in Russia that the political level does not care whether
this problem is solved, it is pure and simple. Unlike here, and un-
like the witnesses, particularly the official witnesses, they just
don't care. I think you are correct that the real threat is that with-
out some kind of political accord, agreement, among central banks
and among governments, that these problems be addressed, par-
ticularly not in hindsight, but with some foresight, particularly re-
garding electronic money and stored value cards. Without that kind
of accord, we will not solve the problem.

I think that the opportunity is growing, as everyone else here
has documented with more technical skill than I can, for system-
atic thwarting of all forms of money laundering control, watching,
monitoring, filing, reporting that we know of today. But, by the
same token, because it is becoming computerized, and because the
technology is available to everybody, and because the banking in-
dustry in this country and many others, is investing so much
money in trying to agree on standards, that out of the development
of electronic money and the movement of money electronically, we
will see a form of uniformity, at least on standards, that will offer
us the opportunity to see where money is coming from and see
where it is headed, out of the problem comes the solution.

I am a process person. I think that we have heard an excellent
discussion from many different perspectives of what is wrong. The
real question is, how do we solve it? I believe we solve it by a sys-
tematic approach and a systematic solution. It will be techno-
logically-based, based on these new forms of moving money.

It needs negotiation, it needs negotiation with the banking indus-
try between this committee and this Congress and the industry to
see what the industry is developing in the way of a systematic solu-
tion which can be used with the convenience of those stored-value
cards that we customers want, to figure out where inordinate
amounts of money are coming from, where it has travelled through,
and where it is headed.

I think it needs some negotiation between our government and
other governments to agree on some uniform standard. I think it
needs some negotiation by the Federal Reserve with the Bank for
International Settlements, and with other central banks on uni-
form standards for understanding how this money should move. I
think the committee has the role with the industry, the State De-

partment has the role with the foreign governments, and I think
the Fed really does have a role with the Bank for International
Settlements,

I think the KGB is in banks, to answer a question that you have
posed, Mr. Royce, not because the KGB as an institution decided
that it was going to get into banks, but because when banks were
effectively cut off from their domestic subsidy inside Russia in
1987, that's when they first started doing it, and when the Soviet
Union dissolved, effectively at the end of 1991, the banks needed
fixers. They needed people who knew the Russian political system,
particularly the domestic system, so that thev could get around the
whole function of filing forms, and they did have some reporting
systems, get around tax compliance, get around currency reporting,
even in the rudimentary form that it existed there, and the KGB
people, particularly retirees, were very, very well informed on how
to beat the domestic Russian system. They brought extra value-
added to the extent that they knew from an intelligence or profes-
sional standpoint how foreign banking systems worked, but that
was not their primary value-added to the banks.

The people inside Russia and inside the banking systems there
are corrupt by our standards, but thev are not corrupt by their
standards. It is OK to accept money where we would never think
of a government official accepting money. It is OK to make an
inter-bank clearing system available for companies that are trying
to hide their income, their revenues, cut their taxes, which is what
Russian companies do a lot. We don't think it is OK. It is tolerated,
it is acceptable.

I believe, and I will conclude on this point, that although it is
understandable that we speak of more law enforcement, that it is
misleading to talk about more law enforcement. I was particularly
puzzled that the Department of State has suggested they need
more space, more law enforcement people. As you know, I am a
former foreign service officer, I think the foreign service works now
kind of like it did before. To the extent that we have yet more peo-
ple in embassies delegated the responsibility of dealing with these
matters at an operational level, we remove the incentive for the
Chief of Mission, for the Ambassador, to make this a political issue,
number one, and deal with that at a political level with the oppos-
ing government, or the, shall we say, the host or home country
government.

I don't know that we need more law enforcement people overseas.
I think we need to make this more of a political priority, and I may
add, Mr. de Borchgrave, I agree with you fundamentally that the
threat to the future is financial destabilization.

Let me suggest this, and this may be a flight of fancy but, none-
theless, it is worth some thought; because if 20 percent of it is val-
uable and 80 percent of it has to be thrown away, well, so be it.
We have within our power — using plain off-the-shelf software that
we can buy at any computer store — to put a scenario in a single
laptop computer and to take it around and to show it to some
central banks and to some governments, some leaders of Finance
Ministry's, what would happen if something akin to the pounding
that the Pound took several years ago took place today as a result
of a purposeful destabilization effort by some organization some-

where, I think once we see it graphically, once it is in color, once
it is on a computer screen, and once it is reduced to elemental sin-
gle-syllable forms, we can get a sense of the problem and we may
be able to excite some political will to negotiate some accord, agree-
ment, among governments to get uniform approaches, at least to
identify where the dirty players are coming from. We should do it
with Russia. We should start there, and we should look to the polit-
ical leaders of our government to negotiate this and to show this,
and even to understand it.

I will stop there, and I will be pleased to answer your questions.

[The prepared statement of Mr. Clifford L. Brody can be found
on page 307 in the appendix.]

Chairman Leach. Thank you very much.

Let me begin with Mr. Royce since I skipped him earlier. I will
come back.

Mr. Royce. Thank you, Mr. Chairman.

I guess the first question that comes to mind is how do we im-
pose, how do we impose on these other countries, how does the Ad-
ministration or how do we in Congress begin to impose on Switzer-
land and other nations? I mean, Mr. de Borchgrave, you explained
the circumstances there with the Seychelles. Governments around
the country, around the world that basically are the beneficiaries
of the importation of funds from illegal activities that are basically
working hand in glove with people involved with organized crime.

So what do we do in order to force these governments to capitu-
late and begin to operate on these systems that we would like to
impose? So if I could just have a response to that question?

Mr. DE Borchgrave. Well, are you suggesting — are you referring
to PPD— 42, Mr. Royce, of last October which I suggested in my tes-
timony does not go far enough? Given national sovereignties, that
is about as far as you can go today to try to close these loopholes.

The PPD-42 thinks that we can negotiate the closing of these tax
havens or offshore banking centers if they are involved in wide-
scale money laundering but I don't know if our banking experts
would agree with me, I'm not sure how that works technically, as
I cannot detect anything called an American financial loop. If you
think that the New York Federal Reserve alone transfers $2.3 tril-
lion a day, $980 billion of which goes abroad, what does national
sovereignty mean in that context, yet we still have to address this
problem, given the givens, as a problem of national sovereignty,
whether you're dealing with St. Kitts, the Seychelles or Switzer-
land or Liechtenstein. I don't know if you would agree.

Mr. Melnbkoff. If I might, Mr. Royce, I will be going to the Re-
public of Panama for the first Congress of South American bankers
and I think here is a starting point. As a matter of fact, these ques-
tions are going to be posed during this congress, which will last 4
days, and we will be very, very interested in the response that we
get because it is, indeed, a significant problem.

Similarly, to the comments I received in Paris back in January
when I posed the question, know your customer. I thought it was
universally accepted, especially with the G— 7 nations, and that is
not totally accurate. So it will be interesting to get feedback from
these South American countries.

Mr. RoYCE. I am not sure what feedback we are going to get be-
cause their benefit lies in not knowing their customers. Their bene-
fit lies in the fact that these foreign countries have no money laun-
dering laws whatsoever and therefore have a welcome mat out for
the massive cash flows that come through their system from orga-
nized crime and round table discussions with nations that are the
beneficiary of our inability to impose any standards on the conduct
of their banking institutions isn't likely, I think, to get to the root
of the problem.

It is going to take — ^it is going to take the development of some
stick, some incentive to get foreign governments to develop this
body of law,

Mr. Brody. Mr. Royce, if I may, it would seem to me that if the
regulatory community here, together with the banking industry
here in this country, took the — took a very careful look at the tech-
nological development and going into electronic cash and came up
with a set of standards, you might say three things about those
standards. Number one, they would be terrific, technologically, be-
cause our banks are in the forefront of developing this technology.
It is not just the banks; it's the communications companies and the
computer companies as well.

Number two, if we were reallv going to use them and they of-
fered a degree of protection and regulatory capacity to the regu-
latory agencies, as you say, there might be an incentive in there
to some of the other central banks to adopt them. There is a par-
ticular problem in Europe because the European approach to some
of these regulatory standards is different than ours.

But our industry is really putting a lot of muscle, a lot of money
and a lot of intellectual capacity into developing systems that will
actually work and what we can say is that if they are good, if these
systems are good, these other governments, these other central
banks should adopt them and at the end of the day, the rails have
got to match. If they want to work with the system, they've got to
work with the system as we are doing it because this is the way
the picture is going to be painted on the screen.

The real issue is, can banks go forward to other banks and, say,
in Europe or anywhere else, say "this is how we do it." And I think
the answer is, "no." It really has to be the central bank that goes
to the central bank and says, "this is how we are going to do it and
it is a good system and you may not like it but unless you want
the baggage or the fi-eight or the cost of unloading the cars as you
do at some borders between eastern and western Europe and then
reshipping it on and us having to check — whoever the *us' may be,
probably the banks themselves — and add the cost to that, this is
how we ought to do it." And if we've got the best product, they
should want to buy it.

Mr. Royce. I will follow up with one other question, just because
I wanted to ask Mr. de Borchgrave, and this has to do with the
IMF money that the United States basically — ^from what we have
learned about the lack of controls on the system there, from what
we know firom the people that we have talked to, what are our
guarantees that billions of dollars in IMF loans, international
loans, multinational loans that go to that — to Russia end up where

they are supposed to be and don't end up partially being shifted
outside the country? Do you have any information?

Mr. DE BORCHGRAVE. There are no guarantees, Mr. Royce. There
are, built into the IMF agreement as I am sure you have read,
monthly monitoring processes. How good that is going to be, I have
no idea. What I can tell you is that the estimates of our experts
including Dr. Brezezinski and also headquarters of the CSIS, is
that of the $110 billion that has been extended to Russia by West-
ern countries, principally Germany and Western lending institu-
tions, from 60 to 70 percent of that has returned to secret accounts,
private accounts all over the world, in flight capital from Russia.

Do you directly relate that to the $110 billion? I don't know, but
that is the estimate of the experts in terms of what thev believe
to be moving abroad. But now you've got $100 million a day going
back into Russia, buying rubles, so it seems to me it requires a lot
better intelligence than what we have obtained so far.

Mr. Royce. Thank you, Mr. Chairman.

Chairman Leach. I do not know what is possible or not, but in
some ways there might be a role for exposure or disclosure in this
sense, that it strikes one, when one looks at the Russian cir-
cumstance, they have two financial problems of classic proportions.
One, they have no honest intermediary financial system where
someone can — wants to voluntarily put their money and save it.
And, second, they have no lending system at fair rates in which
one can desire a loan.

Beyond that, they have the capital flight issue which makes the
Latin American circumstance of a decade ago look fairly slight. If,
in theory, one had to report to Russia, everybody that takes money
out, if in theory in Russia that was a crime, at some point someone
might enforce it. I mean, it might be a very interesting phenome-
non. And so I don't — so what I am asking here is what is the role
of disclosure in an exposure sense?

Mr. DE BoRCHGRAVE. Mr. Chairman, as we have analyzed what
has happened in Russia since the demise of the Soviet Union, there
has been a literal plundering of that country that has been going
on at every level. We are dealing not with a normal state, as you
have already heard, but as our KGB defectors will tell you, we are
dealing with a state that is criminally focused from top to bottom.

Chairman Leach. I share that. In fact, it is a state that has
plundered itself. And then the question is, do they use those re-
sources to plunder others. But I think that the first is occurring
and is continuing to occur. The second is one of the more interest-
ing questions.

Our prior panel, I mean with some confidence, talked about the
talent in our government. One of the oddities in Russia is they
have one of the poorest social organizations in the history of man-
kind but they have an extraordinarily well educated populace en
masse and an extraordinary number of people with nothing to do
that is constructive. And so when our people say we are at the fore-
front of knowledge in this area, I am — when I look at the history
of Russian mathematicians from the 19th century on, it strikes
me there is a lot of talent there that probably exceeds some of the
people that would be — we would honor very much in our own
bureaucracy.

If that gets directed in a sufficient enough fashion, you've got dif-
ficulties. There are lots of reports that the Russians have opened
windows of look-ins into all sorts of circumstances in America that
they have done nothing with. And then the question is how do
you — what does that mean? I mean, I mean, it looks as if they are
looking at the possible capabilities of tapping in but they haven't
really done the tapping.

I think it is a very dangerous circumstance and I don't know how
to respond other than to say whatever priority we have placed on
it, it is clearly insufficient and so that comes back to looking at our
own organization, our own government. How do we reorganize for
it and how do we motivate the international community when so
many of the parties have a vested interest not to participate?

Do you have any advice in that regard? I assume CSIS is looking
at these?

Mr. DE BORCHGRAVE. We are indeed, Mr. Chairman, and I guess
our bottom line conclusion at this particular stage at this juncture
is intelligence and more intelligence and we don't, in my judgment,
have those capabilities.

I have asked everyone, do you have any idea of how much is com-
ing into Europe every day? What is being bought?

I was in the lobby of a hotel in Geneva and I happened to know
fi^om back in mv Newsweek days the concierge of that particular
hotel, and I said how is the season going? He said, "Thank god for
the Russian Mafia. It would be a disaster without the Russian
Mafia."

We know that all these things are going on. We know what they
are buying. I have a friend the other day who got a call here in
Washington fi-om a Russian zillionaire who wanted to buy an
oceanfront property in Palm Beach, Florida, and he said, well, I
happen to have one on my desk worth $1.7 million — ^it's a good
buy — and he said, Edward, you are insulting me. I wouldn't look
at anything under $5 milHon. He thought tnat $1.7 million was
tacky.

All these things are going on, Mr, Chairman, all over the West-
ern world and no one has a handle on them.

Mr. Brody. Mr. Chairman?

Chairman Leach. Mr. Brody.

Mr. Brody. Thank you. In August of 1991 when the Generals
were locking Mr. Grorbachev up at his country cabin and Mr.
Yeltsin was standing on top of a tank, the Generals had removed
Mr. G«rashenko as the head of the Central Bank.

It's very interesting what happened, because he came back on
the job within 3 days. He was re-appointed. The international com-
munity of commercial banks somehow got a message to the Gen-
erals saying that if you didn't put this guy back in, and we won't
get into the reasons why — not that he was a terrifically competent
Central Banker but he certainly was predictable — were basically
going to cut the spigot on currency flows, money flows to and from
Russia — he was re-appointed and they actually did apparently shut
off the flows for about 12 hours.

It is an awful thing to say about a whole country, and of course
you can't paint totally with a broad brush, but money talks there.
The way you get the attention of people there is to tell them how

their raw profit will be affected negatively or their money will be
lost.

It would seem to me that although someone may come along
some day with a PC and try to destabilize our payment system or
a part of it just to experiment to see if it can be done that a bright
mind, for example, at CSIS ought to be able to put together a hypo-
thetical scenario which points out that when the shell goes off,
some of the shrapnel lands inside Russia.

At the end of the day if our system is destabilized, so is Russia's.
At the end of the day if our financial system is destabilized, so is
the Cajmnan Islands' because people cannot spend the value that
they have stored up either in their mattress or in their electronic
cash card.

We can quantify this. Of course, it takes some assumptions but
all forecasts take assumptions including budget deficits of the U.S.,
investment by the banking industry in electronic cash cards or
whatever — any company does. We make some assumptions, but we
can quantify that and we can deliver it into the hands of the au-
thorities — a picture, because most smart people understand pic-
tures. Words get too complicated. We can point out to the Central
Bank of Russia and to the Finance Minister of Russia, whoever it
may be after the elections, that if they don't clamp down — because
I do believe we know, even though we don't know the exact num-
bers, we know what is going on, but if we don't clamp down and
if they don't clamp down and if some of it is not born and bred in-
side Russia in the way of monitoring, they will suffer with the re-
sidual of the way we suffer.

When they see their interests affected directly, and when some-
one puts some dollar figure next to it, you'll get their attention and
they will respond. We need perhaps a skilled diplomat, a skilled
Central Banker, whoever it may be, but not many people, just to
lay it out and say it won't quite work in a way to insulate Russia
from the devastating effects, and that is why they need to control
their own system: their own self-interest is involved.

Mr. DE BORCHGRAVE. Mr. Royce — with your permission, Mr.
Chairman

Chairman Leach. Yes.

Mr. DE BoRCHGRAVE. Mr. Royce, I think the issue that you raised
before goes much further than legislation. Many of the countries do
have these laws on the books right now. There are the OECD rec-
ommendations. There are laws against money laundering in a wide
variety of Western countries, if not all of them, but the issue is how
do you enforce these laws.

That is the national approach to a transnational problem. I con-
tend that it is never going to work as long as we go on thinking
nationally. One day perhaps we are all going to start thinking
transnationally. How do we move from the national thinking to the
transnational thinking without falling into the multinational think-
ing which of course means the U.N., one world, and so forth, and
immediately people think that you are off the wall.

Chairman Leach. Well, we're glad that you are in the chair. Mr.
Royce, do you have more questions?

Mr. Royce. No, that concludes my questions, Mr. Chairman.

I would just like to thank the panelist and thank Mr. de
Borchgrave and I also want to urge, Mr. Chairman, that maybe we
could take the testimony of our last three witnesses and send it
under separate copy to the members of the full committee with a
note from you urging them to read that testimony, because I think
it is one of the most important subjects that we have covered this
year.

Thank you, Mr. Chairman.

Chairman Leach. I appreciate your comments and I want to
thank the three witnesses and your participation is very impres-
sive. Mr. Brody comes from a background that he knows Russia
well. Mr. de Borchgrave is heading an effort of a very responsible
institutional arrangement of a nature that I think is unprece-
dented. Mr. MelnikofF, representing one of the great American
banks — as you may know, I have a great prejudice for oddly named
institutions and they seem to have particularly good reputations
and we are appreciative of your participation.

Mr. Melnikoff. Thank you, sir.

Chairman Leach. The committee is adjourned.

[Whereupon, at 3:35 p.m., the hearing was adjourned, to recon-
vene at the call of the Chair.]

APPENDIX

February 28, 1996

Currency

News froiii tb« , ^/

Committee on BaokJog and Fioaoclal Servicer

KMihCoogrtu

U.S. House of Represeotativea
James A. L*ach, Chairman

Opening Statement

By Rep. James A. Leach

Chairman, House Banking and Financial Services Committee

Hearing on Organized Crime

and the International Banking System

Feb. 28, 1996

The Committee is meeting today to review the threat organized
criminal groups pose to the international banking system.
Rapid changes in technology, globalization of finance and political
problems in other countries have all put new stresses on the
international financial system. While electronic and international
banking have provided consumers more choices and more efficient
markets, they have also made our financial institutions more
vulnerable to fraudulent international schemes.

Organized crime groups both in the United States and abroad are
engaged in money laundering, counterfeiting of U.S. currency,
counterfeiting of fake financial documents, access device fraud,
and financial extortion on a massive scale. Yesterday, the General
Oversight and Investigations Subcommittee, under the able
leadership of Chairman Bachus, reviewed the threat international
counterfeiting poses to the integrity of the U.S. currency. Today
we will focus on other financial crimes.

As the use of paper currency decreases and gives way to credit
cards and electronic transfers, fraud associated with access
devices becomes more troublesome. This includes the fraudulent use
of credit cards or fraudulent misuse of electronic banking systems.
Last year this concern was made real when the nation's largest
commercial bank, Citicorp, was electronically held up by
international saboteurs. Jesse James has finally met his match.

Approximately, $12 million was illegally transferred (with $400,000
actually withdrawn) via Citicorp cash management systems and the
unauthorized transfers took place all over the globe — from Buenos
Aires to the old Russian capitol of St. Petersburg to Israel.
Given that Citicorp alone moves about $500 billion per day, the
potential risk to the banking industry is staggering.

Page 2 Leach Statement on Organized Crime

Currently, access device fraud costs financial institutions an
estimated $4 billion annually. Nigerian criminal groups reportedly
account for more than $2.5 million in credit card fraud a month in
Dallas alone.

Another fraud being perpetrated by organized groups include so-
called "desk-top" publishing of fake financial documents, sometimes
referred to as prime bank notes. Counterfeiting of corporate
checks, bonds, securities and other real or fictitious negotiable
instruments are being produced to defraud individuals, pension
companies, charities and financial institutions. Two years ago
federal banking regulators issued a warning to the banking industry
on the rise in phony prime bank note activity. Earlier this month
state banking regulators in the Northeast issued another warning to
their state banks, indicating that the threat continues. In
addition, approximately 4 victims per month of a Nigerian Advance
Fee Fraud come to the attention of government officials, with these
victims losing on average $400,000.

Today I will introduce legislation which will help law enforcement
agencies combat the financial crimes of counterfeiting, access
device fraud, and producing bank notes. First, the legislation
will make it a federal crime to pass off fake documents, such as
prime bank notes. Second, it will allow federal law enforcement
agencies to seize the equipment used in committing access device
fraud, such as credit card embossers. Thirdly, the bill will
increase the penalty for counterfeiting to a maximum of 25 years
imprisonment .

Probably the most pernicious crime affecting the banking system,
however, is money laundering, which according to some international
experts now approaches a half trillion dollars a year. Criminals
have found that technological developments appear to have made it
easier to launder their illegal gains. For instance, smugglers may
no longer have to worry about getting cash-full valises through
Customs when they can electronically put thousands of dollars on
stored-valued, or Smart cards, no bigger than the average credit
card.

With regard to money laundering, there is no shortage of domestic
laws. Since 1986, major anti-money laundering legislation has been
enacted in every Congress — from the Money Laundering Act of 1986
which first fully criminalized money laundering to the Anti-Drug
Abuse Act of 1988, to the Depository Institution Money Laundering
Amendment Act of 1990, to the Annunzio-Wylie Anti-Money Laundering
Act of 1992 to the Money Laundering Suppression Act of 1994. But
despite increased criminal penalties and reporting requirements,
criminal syndicates still have found ways to legitimize the
proceeds from their illegal activities. Of special concern is the
use of off-shore corporations and banks to avoid and skirt tougher

center

Page 3 Leach Statement on International Crime

U.S. laws. One of the questions we will be exploring today is what
the U.S. government is doing to counter money laundering overseas.

Off-shore corporations and banks are increasingly being used to
facilitate the transnational illegal activities of organized
criminal groups, such as the Nigerian cells, Asian Triads, Russian
criminal networks, Middle-Eastern organized crime groups and South
American cartels. Many of these off-shore banks face little
regulation and supervision. In fact, some countries have
encouraged the creation of these entities on their shores by
adopting strict bank secrecy laws. The Indian Ocean nation of the
Seychelles was recently chastised by the international community
for setting up an off-shore banking haven tailored for the
international Al Capones.

However, the problems of banking and organized crime are not
isolated to small island countries, but have infected some of the
biggest economies in the world. According to the Russian Ministry
of Interior, 700 banks have been implicated in organized criminal
activity, with 84 Russian commercial bankers being assaulted since
1991. In Japan, recent press accounts have noted a number of
connections between the Japanese mafia, Yakuza, and Japan's
beleaguered banking system; again with numerous assaults against
senior bankers, including two executives being murdered. As U.S.
banking becomes more intertwined with the banking systems of Japan
and Russia, we must be careful not to allow our banks from becoming
infected by the organized crime contagion.

Finally, the activities of these criminal organizations are not
limited to financial crimes. Law enforcement agencies believe that
a clear relationship exists between these "white collar" crimes and
the more violent crimes associated with drug dealing, illegal arm
trafficking, murder, extortion, and alien smuggling. By stopping
the financing and money laundering aspects of their illegal empire,
it is hoped that we will be able to deter the more violent criminal
activity.

Today, the Committee will hear from law enforcement agencies, a
bank regulator, and private experts about the threat these
financial crimes pose to the banking system. The Committee will
look at ways our money laundering, electronic banking,
counterfeiting and bank fraud laws are being implemented and may
need to be updated to combat these crimes. The Committee will also
review the legal framework surrounding the supervision and
regulation of offshore banking.

Because of the breadth and complexity of the problem, today's
hearing can only begin to provide Members and the public a bare
overview of the problem and how the U.S. and local governments are
responding to it. But nevertheless it is intended to provide a
blueprint for further Committee inquiries into the extent and
magnitude of the problem. **************

STATEMENT OF FLOYD H. FLAKE

BEFORE THE HOUSE COMMITTEE

ON BANKING & FINANCL^L SERVICES

FEBRUARY 28, 1996

Thank you Chairman Leach for convening this
important hearing, and for inviting such an impressive
panel of witnesses. I would also extend a warm welcome
to the Honorable Richard A. Brown, the Queens' comity
District Attorney.

Mr. Chairman, under the guidance of Mr. Castle, the
Subcommittee on Domestic and International Monetary
Policy has spent the last year examining the future of
money in America. Throughout this endeavor, the
subcommittee has often focused on the criminal aspects
of electronic banking, and the potential for fraud in credit
card, smart card and stored value card technologies.

The potential for fraud in the credit industry is an
especially sensitive subject for me today, both personally
and professionally. As we will hear from Mr. Brown, the

largest credit fraud ring in the nation was recently
uncovered in my district. This organized criminal
operation had contacts on three continents, stole over a
half million dollars in cash advances, and had access to
nearly $8 million. Mr. Brown announced indictments for
eight co-conspirators, with over two-hundred counts, on
February 7, of this year.

The media frenzy following this discovery revealed
that the criminal activity was part of an alleged Nigerian
mafia. The arrests also shed light on the fact that banks
and credit card companies lose an estimated $3 billion
worldwide from counterfeit and stolen credit cards. But
for an accidental discovery of a fraudulent oard, the
talented investigators of the New York Cit^' Police
Department and the Queens County D.A.'s office might
not have discovered the operation in my district.

Again Mr. Chairman, I must stress the importance of
this hearing, and thank you for providing the committee a

broad spectrum of witnesses with expert opinions. I look
forward to today's testimony.

CAROLYN B MALONEY

I212)B32-6S31
□ 28-1 1 AsTON'A BouLf V,
(7181932-1804

Congress of t\)t ^nitcli States

^ousie o{ Ecpresicntatlbesc

aSHashington. SC 20515-3214

OPENING STATEMENT

THE HON CAROLYN B MALONEY

HEARING ON ORGANIZED CRIME

FEBRUARY 28, 1996

Thank you, Mr Chairman

The kinds of financial fraud we are going to discuss today unfortunately effect every
American At the very least, each one of us pays an increased price on everything from credit
cards to bank fees to make up for the dishonesty of those who don't play by the rules

And some citizens pay a much higher price

New York City's own Queens District Attorney Richard Brown, who will be testifying
here later, has done a lot to drive that point home publicly His hard work resulted in the
indictment of eight Nigerian Nationals, charged with running a multi-million-dollar nationwide
counterfeit credit card operation

The victims of this scheme had their identities stolen, their accounts plundered, and their
credit ratings ruined The scary thing is, this could happen to any of us By some law
enforcement estimates, this type of financial fraud alone is a SI 5 billion underground business.

This is one of the reasons why my colleagues Mr Schumer, Mr Vento and I offered an
amendment to strike language from the Banking Regulatory bill which would have both increased
the maximum consumer liability from $50 to $500 on unauthorized ATM transfers, as well as
transferred the burden of proof to the customer on the issue of providing all relevant information
relating to an unauthorized use

With some of the examples of illegal access to financial information and even PIN numbers
before us today, I'm pleased for the American consumer that our amendment passed this
committee This is a time to maintain, not weaken, consumer protections

I spend a lot of time on my other committee. Government Reform, working to make our
government more responsive to the problems law-abiding Americans and businesspeople face

That's why I authored the legislation to make full and open competition the law of the
land in our bidding process, and that's why I drafted a bill to give our government the tools it
needs to collect on the billions of dollars in bad debt owed to the American taxpayers

These reforms are about targeting the solution to fit the problem: That's what we need to
combat these financial crimes

In the area of money laundering, 1 strongly supported the reduction in the number of
currency transaction reports that banks must file It's the quality, not the quantity of information
we gather that is important By blanketing every transaction over $10,000 with a reporting
requirement, resources were wasted by banks and the government alike It makes no sense to
make banks file new paperwork on every $10,000 transaction of say, a nationally reputable
department store

Instead, Know Your Customer procedures target limited resources at the problem By
spending the time to verify a new account holder's business, a bank then has a standard of
judgment to identify what would be a suspiciously high transaction for each particular customer.

In the near future, we are going to have a hearing on Electronic Benefits Transfer
technology, which could move government benefits like social security and food stamps from
checks and coupons to electronic benefit and debit accounts And last year, we held several
hearings on the future of money

With all these emerging possibilities, government and business will be asking consumers to
place their trust in these new forms of currency

So as we move into this new era, we need to maintaiit, not weaken, our consumer
protections, find ways to make our new technology both protect privacy and increase access to
new services; and work with business, regulators and law enforcement to crack down hard on
those who seek to defraud American consumers and business

Finally, it's important to remember that these financial crimes are often vehicles for other
criminal activities, whether tax evasion, illegal drugs, or even terrorism As the President said last
year "Criminal enterprises are moving vast sums of ill-gotten gains through the international
financial system with absolute impunity We must not allow them to wash the blood off profits
from the sale of drugs from terror or organized crime"

The President underlines the need for more international cooperation of the type the
Administration's Financial Crimes Enforcement Network is pursuing, in cooperation with private
industry and international r^ulators

I hope this hearing today can provide us with some new insight and ideas to combat
criminal aaivity aimed at our financial institutions

Thank you. N4r. Chairman.

U.S. REPRESENTATIVE ED ROYCE

House Committee on Banking and Financial Services

Crime & International Banking Hearing

2/28/96

Thank you Mr. Chainnan. I commend you for holding this hearing and I welcome
our wimesses today. This is the third bearing that Congress has held regarding the issue of
transnational organized crime and the threat posed to international financial systems by these
organizations.

In previous hearings, we have heard that in Russia alone, organized crime
encompasses some 1,500 state enterprises, 4,000 share holding societies, 500 joint ventures
and 550 banks. From news reports and research done by various organizations, such as the
American Foreign Policy Council, we know that the most r!q)id growth in organized crime in
Russia is now within the financial and banking structure, and it is being coordinated by
former Soviet KGB operatives.

Indeed, according to party documents and a 1992 Russian parliamentary investigation,
the former Soviet First Chief Directorate, the KGB's foreign intelligence arm, was
instrumental in setting up many banking institutions, which are now integrating themselves
into the western banking system.

A parliamentary investigative commission, led by Lev Ponomarev and Aleksei
Surkov, concluded the following: "The Politburo of the Communist Party of the Soviet
Union Central Committee made several secret resolutions toward direct concealment in
commercial structures of property and monetary resources actually accumulated at the
expense of the nation. Based on this, at all levels of the Party hierarchy, there was a mass
founding of party banks, joint enterprises, and joint stock companies in 1990 and 1991."

Published rqmrts in the Russian and Western media say that 75 to 80 percent of all
joint ventures with western companies founded between 1989 and 1991 involve officers of
the KGB. With this type of KGB involvement, the Russian Mafiya has been provided with
organizational experience, professional intelligence techniques and the manpower to carry out
their illegal activities.

This professionalization of the Russian Mafiya poses new threats to U.S. and world
financial markets. White coUar crimes, counterfeiting, fraud, and money laundering are the
weapons of choice, with the money then being used to expand operations into violent crimes
such as drug smuggling, murder, extortion and — most alarmingly — trafficking in arms and
nuclear weapons-grade plutonium.

With ever-expanding increased computer access and encryption decoding techniques
that new technologies bring, it is hardly surprising to find that much organized crime today is
being carried out via the computer. Offshore operations are being increasingly used to
facilitate illegal activities of organizations not only in Russia, but also in Africa, the Middle
East and South America. Information and testimony from previous hearings has shown that
U.S. institutions, commercial accounts, municipalities and even our country's defense and
civil systems are all vulnerable, if not under attack right now.

Today, we will hear from witnesses who will again stress the vulnerabilities of
American institutions and government to these escalating "cyber-attacks," and we will
hopefully hear what progress is being made to develop uitemational laws, technologies and
procedures to blunt money laundering and criminal activities in the financial sector.

But the overriding question that I hope wUI be addressed by each of our witnesses
remains: What can we as legislators do to help? What can we do to provide our institutions
and citizens with the capability to defend themselves and to punish those who would seek to
conduct their criminal activities through financial systems?

We cannot allow ourselves to be complacent and we cannot allow a major failure or
financial catastrophe to occur because we were not willing to take preventative measures.

Thank you Mr. Chairman, I look forward to the testimony of our witnesses.

» tt tt

Opening Statement of the

HON. J.C. WATTS, JR.

Before the House Committee on Banking & Financial Institutions
February 28, 1996

Organized crime is an oxymoron. Crime, by its very nature, is disorganization ~
sick organization that creates havoc and destroys lives in its wake.

When we tackle the issue of organized crime both nationally and internationally,
we are looking at a huge network of disease. We are looking at an underground economy
that gets better rewards than those trying to conduct legitimate and honest business. Illicit
capitalism on the streets rewards the criminal more than the family willing to risk their
savings and take $5000 to start a family business.

Billions ~ maybe even trillions of dollars illegally go through an unwashed system.
While legitimate people in legitimate businesses pay more that their fair share of taxes
and fees, the criminals circumvent the system and exploit it for their own benefit.

Folks, it is time that we strengthen our grip on financial terrorists. By their very
definition, criminals are hard to catch but that does not mean we should stop trying. Mr.
Chairman, I salute you for bringing this issue to the fore. I am also anxious to hear and
support our FBI agents, Secret Service agents and others involved in stopping these
financial bandits fi-om wreaking havoc on our domestic tranquility.

99SM2 O— 9fi 4

United States General Accounting Otfice

GAO

Testimony

Before the Committee on Banking and Financial Services,
House of Representatives

For Release on Delivery
Expected at
10:00 a.m.. EST
Wednesday,
February 28. 1996

MONEY LAUNDERING

U.S. Efforts to Combat Money
Laundering Overseas

Statement of JayEtta Z. Hecker, Associate Director
International Relations and Trade Issues

GAO/T-GGD-96-84

MONEY LAUNDERING:
U.S. EFFORTS TO COMBAT MONEY LAUNDERING OVERSEAS

SUMMARY OF STATEMENT BY JAYETTA Z. HECKER, ASSOCIATE DIRECTOR
INTERNATIONAL RELATIONS AND TRADE ISSUES

Money laundering is a global problem requiring collective
international efforts to combat. GAO's testimony describes U.S.
efforts to deter this activity, including: (1) U.S. and seven
European countries' regulation of financial institutions in regard
to money laundering, (2) U.S. bank regulators' oversight of money-
laundering controls at overseas branches of U.S. banks, (3) U.S.
law enforcement agencies' efforts to coordinate their overseas
anti -money- laundering activities with host countries' law
enforcement agencies, and (4) U.S. participation in international
anti-money-laundering arrangements .

U.S. banking regulators' previous domestic anti-money-laundering
efforts relied mainly on reporting regulations that require
financial institutions to report currency transactions above
certain thresholds. Current approaches include an increased
reliance upon reporting suspicious transactions. Also, most U.S.
banks have adopted "know your customer" policies to help identify
suspicious transactions, according to the American Bankers
Association. European countries GAO visited have relied on
suspicious transaction reports as well as on know your customer
policies to combat money laundering through financial institutions.

U.S. bank regulators may face impediments in overseeing money-
laundering controls at branches of U.S. banks abroad. These
branches are subject to host countries' anti-money-laundering laws
rather than U.S. anti -money- laundering laws. As a result, U.S.
regulators" examinations of these branches are more narrowly scoped
than comparable examinations of branches in the United States. In
addition, host country bank privacy and data protection laws may
serve to prevent U.S. regulators from performing on-site
examinations of U.S. branches in certain countries. However,
regulators can rely on other means to counteract or prevent money-
laundering activities at these overseas branches.

Several U.S. law enforcement agencies are responsible for
investigating crimes involving money laundering. Law enforcement
officials from two European countries expressed concern to GAO
about the difficulties of dealing with multiple U.S. agencies.
U.S. law enforcement agency officials, however, prefer not to
designate a single agency as a focal point on overseas money-
laundering inquiries because of jurisdictional problems. Instead,
a niimber of U.S. agencies have adopted a July 1994 Memorandum of
Understanding that aims to improve overseas coordination.

Also, the United States is working with other countries through
treaties and arrangements to establish global anti -money- laundering
policies, mainly through the Financial Action Task Force.

Mr. Chairman and Members of the Committee:

I am pleased to be here today to discuss money laundering, a global
problem that needs to be fought collectively by the international
community. Increased attention to U.S. efforts to combat money
laundering abroad is important, particularly as U.S. efforts have
made it more difficult for individuals to launder money
domestically.

My testimony today will discuss (1) U.S. and selected European
countries' approaches to combating money laundering through
regulation of financial institutions,' (2) U.S. bank regulators'
oversight of money- laundering controls at overseas branches of U.S.
banks, (3) U.S. law enforcement agencies' efforts to coordinate
their overseas anti-money-laundering activities with host
countries' law enforcement agencies, and (4) U.S. participation in
international arrangements to combat money laundering abroad.
Our work was designed to provide a framework for understanding U.S.
international efforts to combat money laundering rather than an
assessment of U.S. activities in this area.

My remarks today are based on the work that we performed for
Ranking Minority Member Henry B. Gonzalez over the past year and a

'Treasury regulations implementing the Bank Secrecy Act (Public
Law 91-508, Oct. 26, 1970) define the term "financial
institution" to include banks, federally regulated security
brokers, currency exchange houses, funds transmitters, check-
cashing businesses, and persons subject to supervision by state
or federal bank supervisory authorities.

half on U.S. efforts to combat overseas money laundering. Most of
our work will be more comprehensively summarized in a report we
plan to release shortly. In doing our work, we obtained views and
material from (1) U.S. bank regulatory officials, including the
Department of the Treasury's Office of the Comptroller of the
Currency (OCC) and the Federal Reserve Board (FRB) ; (2) U.S. law
enforcement officials in the United States and abroad, including
the Department of the Treasury's Customs Service, and Internal
Revenue Service (IRS), and the Department of Justice's Criminal
Division, Federal Bureau of Investigation (FBI), and Drug
Enforcement Administration (DEA) ; (3) Treasury's Financial Crimes
Enforcement Network (FinCEN) and the Department of State; (4) law
enforcement, bank regulatory, and financial institution officials
we visited in England, France, Italy, Germany, Hungary, Poland, and
Switzerland; (5) Interpol (the international criminal police
organization); and (6) the Secretary of the multilateral Financial
Action Task Force (FATF) .

BACKGROUND

Money laundering, which is the disguising or concealing of illicit
income in order to make it appear legitimate, is a problem of
international proportions. Federal law enforcement officials
estimate that between $100 billion and $300 billion in U.S.
currency is laundered each year.

Niimerous U.S. agencies play a role in combating money laundering.
Law enforcement agencies within the Departments of Justice and the
Treasury have the greatest involvement in domestic and
international money- laundering investigations. FRB and OCC have
the primary responsibility for examining and supervising the
overseas branches of U.S. banks to ascertain the adequacy of the
branches' anti -money- laundering controls. FinCEN provides
governmentwide intelligence and analysis that federal, state,
local, and foreign law enforcement agencies can use to aid in the
detection, investigation, and prosecution of domestic and
international money laundering and other financial crimes. In
addition, other U.S. agencies play a role, including the State
Department, which provides information on international money
laundering through its annual assessment of narcotics and money-
laundering problems worldwide.^

U.S. AND EUROPEAN APPROACHES TO COMBATING
MONEY LAUNDERING THROUGH FINANCIAL INSTITUTIONS

Until recently, U.S. banking regulators' anti-money-laundering
efforts relied heavily on regulations requiring financial
institutions to routinely report currency transactions that exceed
$10,000, primarily through filing currency transaction reports

^See International Narcotics Control Strategy Report . U.S.
Department of State, Bureau for International Narcotics and Law
Enforcement Affairs (Washington, D.C.: Department of State, Apr.
1995) .

(CTR) with the IRS. U.S. banking regulators have also relied on
approaches in which financial institutions report financial
transactions involving known or suspected money laundering.^
According to a senior Treasury official, U.S. regulators' anti-
money- laundering efforts in coming years are expected to rely more
on the reporting of financial transactions involving known or
suspected money laundering. U.S. regulators will also be expected
to continue relying on CTRs, but to a lesser extent.

Most U.S. banks have adopted so-called "know your customer"
policies over the past few years to help them improve their
identification of financial transactions involving known or
suspected money laundering, according to the American Bankers
Association. Under these know your customer policies, which are
currently voluntary but which the Treasury plans to make mandatory
in 1996, financial institutions are to verify the business of a new
account holder and report any activity that is inconsistent with
that type of business. According to the American Bankers
Association, these policies are among the most effective means of
combating money laundering, and the majority of banks have already
adopted such policies.

The seven European countries we visited have tended to model their

^On February 5, 1996, the Treasury and banking regulators
finalized rules to require, in general, that banks and other
depository institutions file a single report, known as the
suspicious activity report, to FinCEN for suspicious transactions
at or above $5, 000.

100

anti -money- laundering measures after a 1991 European Union (EU)^
Directive^ that established requirements for financial institutions
similar to those that financial institutions conducting business in
the United States must follow. However, instead of relying on the
routine reports of currency transactions that the United States has
traditionally emphasized, European countries have tended to rely
more on suspicious transaction reports and on know your customer
policies. These know your customer policies are somewhat more
comprehensive than comparable U.S. ones, according to European bank
and regulatory officials.

While Hungary and Poland have adopted anti -money- laundering
measures following the EU Directive, banking and government
officials in these two countries told us that the implementation
and enforcement of their anti -money- laundering measures have been
hindered. They attributed problems to such factors as resource
shortages, inexperience in detection and prevention, and in Poland,
conflicts between bank secrecy laws and recently adopted anti-
money- laundering statutes.

FinCEN and INTERPOL have recently initiated Project Eastwash, to

*EU includes 15 member nations: Austria, Belgium, Denmark,
Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the
Netherlands, Portugal, Spain, Sweden, and the United Kingdom
(U.K.) .

^Council Directive of 10 June 1991 on the Prevention of the Use
of the Financial System for the Purpose of Money Laundering
(91/308/EEC) .

101

attempt to assess money laundering in 20 to 30 countries throughout
East and Central Europe and the former Soviet Union. According to
FinCEN officials, as of late 1995 on-site visits had been made to
five countries to assess the law enforcement, regulatory,
legislative, and financial industry environment in each nation.
Information from these visits is to be used for policy guidance and
resource planning purposes for both the countries assessed and U.S.
and international anti -money- laundering organizations, according to
these officials.

U.S. BANK REGULATORS' OVER. qiGHT OF MONEY-LAUNDERING CONTROLS AT
OVERSEAS BRANCHES OF U.S. BANKS

U.S. banks had over 380 overseas branches located in 68 countries
as of August 1995. These branches, which are a direct extension of
U.S. banks, are subject to host countries' anti-money-laundering
laws rather than U.S. anti -money- laundering laws, according to OCC
and FRB officials. In some cases, U.S. banking regulators have not
been allowed to perform on-site reviews of these branches' anti-
money- laundering controls.

U.S. Review of Some Overseas Bank
Branches Faces Obstacles

According to U.S. banking regulators, bank privacy and data

102

protection laws in some countries serve to prevent U.S. regulators
from examining U.S. bank branches located within their borders. Of
the seven European countries we visited, U.S. regulators were not
allowed to enter Switzerland and France to examine branches of U.S.
banks because of these countries' strict bank secrecy and data
protection laws. U.S. regulators, however, have other means
besides on-site examinations for obtaining information on U.S.
overseas branches' anti -money- laundering controls, according to FRB
and OCC officials. For example, U.S. regulators can and do
exchange inf ormation--excluding information requested for law
enforcement purposes--with foreign banking regulators on their
respective examinations of one another's foreign-based branches.
In addition, FRB can deny a bank's application to open a branch in
a country with strict bank secrecy laws if it does not receive
assurance that the branch will have sufficient anti-money-
laundering controls in place, according to FRB officials.

Examinations of Overseas Branches
Tend to Be Narr owlv Scoped •

OCC and FRB officials said that in countries that allow them to
examine anti-money-laundering controls at overseas branches of U.S.
banks, such examinations are of a much narrower scope than those of
branches located in the United States. One reason is that host
country anti -money laundering measures may not be as stringent as
U.S. anti -money- laundering requirements and, thus, may not provide

103

the necessary information for U.S. examiners. OCC and FRB
officials also said that the expense of sending examiners overseas
limits the amount of time examiners can spend reviewing the anti-
money- laundering controls of the bank. However, according to these
officials less time is needed to conduct an anti-money- laundering
examination at some overseas branches because of the small volume
of currency transactions. FRB officials told us that they have
recently developed money- laundering examination procedures to be
used by its examiners to address the uniqueness of overseas
branches' operations and to fit within the short time frames of
these examinations. Although these procedures have been tested,
they have not been implemented and, thus, we have not had the
chance to review them.

U.S. LAW ENFORCEMEN T AGENCIES' OVERSEAS EFFORTS

Responsibilities for investigating both domestic and international
crimes involving money- laundering are assigned to numerous U.S. law
enforcement agencies, including DBA, FBI, IRS, and the Customs
Service. While European law enforcement officials acknowledged the
important role U.S. law enforcement agencies play in criminal
investigations involving money laundering, some commented about the
difficulties of dealing with multiple agencies.

Some British and Swiss law enforcement officials we spoke with said
that too many U.S. agencies are involved in money- laundering

104

inquiries. This overlap makes it difficult, in some
money- laundering inquiries, to determine which U.S. agency they
should coordinate with. These European officials indicated that
designating a single U.S. office to serve as a liaison on these
money- laundering cases would improve coordination.

According to U.S. law enforcement agency officials, however,
designating a single U.S. law enforcement agency as a focal point
on overseas money-laundering cases could pose a jurisdictional
problem because money- laundering cases are usually part of an
overall investigation of another crime, such as drug trafficking or
financial fraud. Nevertheless, U.S. law enforcement agencies have
taken recent steps to address overseas money- laundering
coordination. In particular, a number of U.S. agencies adopted a
Memorandum of Understanding (MOU) in July 1994 on how to assign
responsibility for international drug money- laundering
investigations. Law enforcement officials were optimistic that the
MOU, which was signed by representatives of the Secretary of the
Treasury, the Attorney General, and the Postmaster General, would
improve overseas anti -money- laundering coordination. Although law
enforcement is optimistic about improvements in coordination, we
have not assessed how well U.S. international investigations are
being coordinated.

INTERNATIONAL ARRANGEMENTS TO COMBAT
OVERSEAS M ONEY LAUNDERING

105

The United States works with other countries through multilateral
and bilateral treaties and arrangements to establish global anti-
money- laundering policies, enhance cooperation, and facilitate the
exchange of information on money- laundering investigations.

Multilateral Efforts to Establish ninbal
Anti-Mon ev-Launderina Policies

The United States' multilateral efforts to establish global anti-
money- laundering policies occur mainly through FATF,' an
organization established at the 1989 economic summit meeting in
Paris of major industrialized countries. The United States,
through the Treasury Under Secretary for Enforcement, assumed the
presidency of FATF in July 1995 for a one-year term. FATF has
worked to persuade both member and nonmember countries to institute
effective anti -money- laundering measures and controls. In 1990,
FATF developed 4 recommendations that describe measures that
countries should adopt to control money laundering through
financial institutions and improve international cooperation in
money- laundering investigations.

During 1995, FATF completed its first round of mutual evaluations

'FATF consists of the following members: Australia, Austria,
Belgium, Canada, Denmark, the European Commission (representing the
EU) , Finland, France, Germany, Greece, the Gulf Cooperation
Council, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain,
Sweden, Switzerland, Turkey, the U.K., and the United States.

106

of its members' progress on implementing the 40 recommendations.
FATF found that most member countries have made satisfactory
progress in carrying out the recommendations, especially in the
area of establishing money- laundering controls at financial
institutions. FATF has also continued to identify global money-
laundering trends and techniques, including conducting surveys of
Russia's organized crime and Central and East European countries'
anti-money-laundering efforts. In addition, FATF has expanded its
outreach efforts by cooperating with other international
organizations, such as the International Monetary Fund, and by
attempting to involve nonmember countries in Asia, South America,
Russia, and other parts of the world.

A more recent multilateral effort involved the United States and
other countries in the Western Hemisphere. On December 9-11, 1994,
the 34 democratically elected leaders of the Western Hemisphere met
at the Summit of the Americas in Miami, Florida. At the summit,
the leaders signed a Declaration of Principles that included a
commitment to fight drug trafficking and money laundering. The
summit documents also included a detailed plan of action to which
the leaders affirmed their commitment. One action item called for
a working- level conference on money laundering, to be followed by a
ministerial conference, to study and agree on a coordinated
hemispheric response to combat money laundering.

The ministerial conference, held on December 1-2, 1995, at Buenos
11

107

Aires, Argentina, represented the beginning of a series of actions
each country committed to undertake in the legal, regulatory, and
law enforcement areas. U.S. Department of Justice officials told
us that these actions are designed to establish an effective anti-
money- laundering program to combat money laundering on a
hemispheric basis. Further, the officials told us that the
conference created an awareness that money laundering is not only a
law enforcement issue, but also a financial and economic issue,
requiring a coordinated interagency approach.

As part of another multilateral effort, FinCEN is working with
other countries to develop and implement Financial Information
Units (FIU) modeled, in large part, on FinCEN operations, according
to FinCEN officials. FinCEN has also met with officials from other
countries' FIUs to discuss issues common to FIUs worldwide. The
most recent meeting was held in Paris in November 1995, during
which issue-specific working groups were created to address common
concerns such as use of technology and legal matters on exchanging
intelligence information.

Bilateral Agreements to Improve Cooperation
in International Money- laundering Cases

U.S. Treasury officials said that in recent years, the United
States has relied on bilateral agreements to improve cooperation in
international investigations, prosecutions, and forfeiture actions

108

involving money laundering. These bilateral agreements, consisting
of mutual legal assistance treaties, financial information exchange
agreements, and customs mutual assistance agreements with
individual countries, also help to facilitate information exchanges
on criminal investigations that may involve money laundering.
However, the State Department's 1995 annual report on global
narcotics crime concluded that many countries still refuse to share
with other governments information about financial transactions
that could facilitate global money- laundering investigations.

Mr. Chairman, this concludes my prepared statement. I would be
pleased to try to_ answer any questions you or the Committee may
have .

109

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PWHTED ON Q^ RECrCLED PAPER

For release on delivery
10:00 a.m. E.S.T.
February 28, 1996

Statement by

Edward W. Kelley, Jr.

Member, Board of Governors of the Federal Reserve System

before the

Committee on Banking and Financial Services

U.S. House of Representatives

February 28, 1996

Ill

Mr. Chairman, I am pleased to appear before the Banking
Committee on behalf of the Federal Reserve to discuss the impact
of crime on the stability of the banking system and the Federal
Reserve's efforts to assist banks and law enforcement officials
in countering criminal activity. As a bank supervisory agency,
the Federal Reserve Board places a high priority on providing
assistance in deterring, detecting and reporting criminal
activities directed at banking organizations, and we appreciate
the Committee's interest in this important area.

Mr. Chairman, your letter of invitation asked me to
address the threat criminal activity poses to the banking system,
and I would like to turn initially to that issue. While all bank
losses that result from criminal activity are unacceptable, it is
important to put the risks associated with criminal activities
affecting banks in the appropriate context. As of September 30,
1995, the over 10,000 insured commercial banks in the United
States had total aggregate assets of about $4.2 trillion,
combined capital of approximately $350 billion, and earnings of
$37 billion for the first three quarters of 1995.

In view of the current financial strength of the U.S.
banking system and estimates of the extent of banks' losses
resulting from criminal misconduct, which include the banking
industry's 1994 estimates of approximately $800 million in losses
associated with check fraud and $700 million from credit card
fraud, we believe that losses from criminal activities do not
pose a systemic risk to the banking system. Also, we have no
information that suggests that any individual U.S. banking

112

organization has been overtaken or substantially threatened by
criminal organizations or activities.

While we see no systemic threat to the banking system,
we obviously are concerned about the risks to the reputation and
integrity of our nation's banks arising from criminal elements
using the banking system for illicit purposes. These risks are
best illustrated by money laundering, estimates of which range
between $300 and $500 billion annually. While no amount of money
laundering is acceptable, there is no evidence that the flow of
these funds through U.S. banks on its own poses a systemic risk.
However, if left unchecked, the use of our banking system by
criminal elements could undermine the reputation of banks or
weaken the public's confidence in banks as safekeepers of their
funds. For this reason, and to support our law enforcement
agencies in their efforts to combat crime, the Federal Reserve's
efforts to attack the money laundering problem continue to be one
of our highest bank supervisory priorities.

Federal Reserve Role

As banking supervisors, the Federal Reserve has an
important role in ensuring that criminal activity does not pose a
systemic threat, and, as importantly, in improving the ability of
individual banking organizations in the United States and abroad
to protect themselves from illicit activities. Because bank
systems and bank employees are the first and strongest line of
defense against financial crimes, the Federal Reserve places a

113

high priority on ensuring that banking organizations have
appropriate controls in place to protect themselves and their
customers from criminal activities. The Federal Reserve places
an equally high priority on supporting efforts by U.S. law
enforcement agencies to apprehend criminal enterprises before
they can cause harm to consumers and banking organizations.

A banking organization's best protection against
illicit activities is its own policies and procedures designed to
identify and then reject potentially illegal or damaging
transactions. For this reason, the Federal Reserve and other
regulators have implemented various directives for banks to
establish internal controls and procedures designed to detect
unusual or suspicious transactions that, if unchecked, could lead
to fraud, money laundering, or other types of criminal
misconduct .

To understand and properly evaluate the effectiveness
of a banking organization's controls and procedures, we have
developed extensive examination procedures and manuals, and our
bank examiners are provided with comprehensive training and with
timely information to assist them in identifying suspicious or
unusual transactions. I need to emphasize, however, that we do
not expect our examiners to act as police. The Federal Reserve
is a bank supervisory agency, not a criminal law enforcement
authority; we see our role as auxiliary to the legitimate law
enforcement duties of criminal justice agencies. Our examiners
do not, nor should they, possess the necessary tools required to

114

fully investigate and prosecute criminal conduct. This is a
function ably handled by our law enforcement colleagues.
In recent years, however, the Federal Reserve
determined that in some instances it is necessary to go beyond
the scope of an ordinary bank examination to determine if
violations of law or regulation have occurred. For this reason,
in 1993 the Special Investigations and Examinations Unit was
created in the Board's bank supervision division. This unit's
function, in part, continues to be that of taking information
developed during the course of an examination and conducting a
specialized investigation or examination to determine what, if
any, laws have been violated through activity conducted at a
bank. The Unit notifies the appropriate law enforcement agency
when apparent criminal violations are detected, and works hand in
hand with them whenever necessary.

Knowino Your CuBtomer and SuBpicious Traneaction Reporting

The Federal Reserve believes that the most prudent
method for banking organizations to protect themselves from
allowing criminal transactions to be conducted at, or through,
their institutions is to adopt what has become known as "Know
Your Customer" policies and procedures. Safety and soundness
considerations dictate that banking organizations have adequate
policies and procedures in this area, including procedures to
ensure compliance with the rules and regulations designed to
assist in the detection of criminal activity; decrease illegal

115

activity through increased awareness by employees; protect the
reputation of a banking organization; and promote good, as
opposed to unsavory, customer relationships.

"Know Your Customer" procedures, which are applied to
all facets of a banking operation, allow the organization to
identify their customers and the transactions that they conduct
on a regular basis, be alert to transactions that may be
irregular or abnormal for a particular customer, determine
whether there is an apparent valid or lawful purpose for the
transactions, and report to the appropriate authorities those
transactions which appear to be suspicious or criminal in nature.
One of the more significant components of "Know Your Customer"
procedures is the ability of bcuiking organizations to identify
and report suspicious or potentially criminal activities. For
the past ten years, the Federal Reserve and the other federal
bank supervisory agencies have required banking organizations to
report suspected criminal activities to us, as well as various
federal law enforcement agencies. In 1995, there were over
70,000 criminal referrals filed.

In order to reduce the burden on financial institutions
while increasing the usefulness of the information provided on
suspected criminal conduct, the Federal Reserve, together with
the other federal bank supervisory agencies and the Department of
the Treasury, revised the criminal referral process in several
significant respects. First, effective on April 1 of this year,
the new process combines the current criminal referral rules of

116

the bank supervisory agencies with Treasury's suspicious activity
reporting requirements related to money laundering offenses.
Second, a uniform interagency reporting form has been developed
for purposes of referrals to all agencies. Third, we have
provided for the filing of the uniform form in one location as
opposed to the current requirement of filing six or seven copies,
and banks will have the ability to use computer software, to be
distributed by us, to assist in the preparation and magnetic
filing of the reports.

Another important improvement is the statutory
protection recently afforded banking organizations that report
suspicious or criminal conduct, which provides banking
organizations and their employees with immunity from civil
liability for reporting known or suspected criminal offenses or
suspicious activities. This protection, long sought by the
banking community and supported by the Federal Reserve, gives
great comfort to banking organizations that they will not be held
liable for providing timely and useful information to law
enforcement authorities.

Federal Reserve Information ABBistance

Over the years the Federal Reserve also has taken the
initiative to provide timely and useful information to banking
organizations with regard to ongoing criminal conduct or
^potential schemes that may have an adverse impact on them. In
the last few years, the Federal Reserve and the other federal

117

banking supervisory agencies have issued bulletins on such
matters as "Prime Bank Fraud" schemes and credit card fraud.
Such notices to the banking industry are intended to alert banks
of the potential dangers of such schemes and practices.

From time to time, the Federal Reserve has also
developed and issued policy statements with regard to activities
occurring in banking organizations that we have determined could
pose a threat to the integrity of a bank. One such example was
the Federal Reserve's development and issuance of a policy
statement on "payable through accounts" in 1994. The purpose of
the policy statement was to ensure that banks that engage in
payable through activity- -which basically involves the use of a
checking account at a bank in the United States by an individual
who resides outside of this country- -have appropriate procedures
in place to ensure that no illicit activities are being conducted
through these accounts .

Also, in accordance with section 404 of the Money
Laundering Suppression Act of 1994, the Federal Reserve has been
working with the Treasury to establish a process whereby the
federal law enforcement community will provide, on a regular
basis, information with regard to new or emerging money
laundering schemes, which will then be disseminated to financial
institutions .

118

Anti -Money Laundering Efforts

The Federal Reserve continues to be a leader among the
federal banking supervisory agencies in addressing money
laundering-related matters. Staff of the Federal Reserve has
been in the forefront of the battle to deter money laundering
through banking organizations by, among other things, developing
anti -money laundering guidelines, conducting money laundering
investigations, providing expertise for law enforcement
initiatives, and providing training to various government
agencies .

Training provided by Federal Reserve staff to law
enforcement agencies has included programs at the FBI Academy and
the Treasury's Federal Law Enforcement Training Center.
Additionally, Federal Reserve staff has provided training in
anti -money laundering procedures to foreign governments, such as
Russia, Poland, Hungary, the Czech Republic, Brazil, Ecuador,
Argentina, and several other countries in the Middle and Far
East .

In accordance with section 404 of the Money Laundering
Suppression Act of 1994, the Federal Reserve chaired a working
group that has developed enhanced examination procedures to
identify appropriate anti-money laundering procedures initiated
by banking organizations. Along with these enhanced money
laundering procedures, the Federal Reserve will very shortly
-release newly revised Bank Secrecy Act examination procedures

119

that will allow examiners to determine more efficiently and
effectively compliance with the Bank Secrecy Act.

Coordination Activities

The Federal Reserve routinely coordinates with federal
law enforcement agencies with regard to potential criminal
matters, including anti -money laundering activities. The scope
of this coordination ranges from our work on the criminal
referral process to specific, case-by-case assistance to law
enforcement agencies resulting from examinations of banking
organizations .

The Federal Reserve is a founding member and active
participant in the well regarded interagency Bank Fraud Working
Group, which consists of representatives of thirteen federal law
enforcement and bank supervisory agencies. Among other things,
this group, which has been meeting on a monthly basis since the
mid-1980s, has coordinated the dissemination of relevant and
timely information on such matters of mutual interest or concern
as: Asian gangs' use of check fraud and check counterfeiting;
West African advance fee schemes and credit card fraud; and asset
forfeiture of criminally derived funds.

The Federal Reserve is also an active participant in
the Financial Action Task Force (FATF) , which was established by
the G-7 group of countries. Board staff has contributed
significantly to the FATF's mission of educating countries around
the world in anti -money laundering and fraud prevention efforts.

120

Off -Shore Corporations and Banks

As a result of our staff's work with law enforcement
authorities, we recognize that crime is an international activity
that is increasingly making use of off-shore corporations and
banks. These are two separate problems that we address in
different manners.

With regard to off-shore corporations, because the
Federal Reserve cannot control a sovereign nation's laws
governing the establishment of corporations in its territory, we
can only address the activities of these companies when they seek
to do business in the United States through banks we supervise.
In this regard, our principal tool is the "Know Your Customer"
policy. As I said before, every domestic and foreign banking
organization supervised by the Federal Reserve should have
adequate policies in this area. This means, for example, that if
a state member bank or a U.S. branch of a foreign bank maintains
a deposit relationship with a corporate entity, wherever it is
chartered, it should take steps to identify its business and the
nature of its routine transactions in order to evaluate better
whether it is engaging in any suspicious activities. While no
federal bank regulator or law enforcement agency can monitor
every transaction undertaken by every corporation doing business
with a U.S. financial institution, we can, and we routinely do,
measure the internal controls and risk management systems
implemented by the banks to make certain that the banks are in
fact adhering to their policies and are aware of the business of

121

their customers, including any that may use off-shore
corporations .

With regard to foreign banks, the Board, since it was
given the power by Congress in 1991, carefully scrutinizes any
foreign bank seeking to do business in the United States. This
includes making certain that the bank is subject to comprehensive
consolidated supervision in its home country, reviewing the
bank's global anti-money laundering procedures, and conducting
background checks with U.S. law enforcement and other agencies.
In addition, as I mentioned, we thoroughly review the operations
of these banks in the United States to make certain their
activities here fully comply with U.S. laws and regulations. The
Federal Reserve is also working in a number of areas to improve
the bank supervisory standards in other banking centers and to
make certain that there is adequate cooperation among supervisors
so that gaps do not occur in the consolidated supervision of
international banking organizations.

Cone luB ion •

In conclusion, we have undertaken extensive efforts and
have used significant resources to combat illegal activities
involving domestic and international banking organizations. I
believe that the Federal Reserve has made significant
contributions to the federal government's law enforcement
endeavors. Because we have a vital interest in protecting the
banking system from criminal elements, we will be continuing our

122

cooperative efforts with other bank supervisors and the criminal
justice agencies to develop and implement programs to better
detect criminal misconduct involving banks.

123

Statement

Stanley E. Morris

Director

Financial Crimes Enforcement Network
(HnCEN)

before

the

Committee on BankinB and Financial Services

House of Representatives

Wednesday

February 28. 1996

124

Mr. Chairman and Members of the Committee, it is an honor and a pleasure to be here
today to testify about the increasing threat posed by international organized crime to the world's
financial systems. The Committee, which has given us major anti-money laundering tools in the
past, is now giving us an excellent opportunity to discuss the evolution of international criminal
organizations and their impact as economic powers.

Before I discuss the issue of organized crime, let me describe the mission of the Financial
Crimes Enforcement Network-FinCEN. FinCEN establishes, oversees, and implements
Treasury's policies to prevent and detect money laundering. It provides analytical case support
to many federal agencies, including the U.S. Secret Service, IRS's Criminal Investigations, U.S.
Customs Service, FBI, and the Drug Enforcement Administration which are significant
investigators in the area of financial crime. FinCEN also administers the Bank Secrecy Act,
which is a key component of Treasury's efforts to fight money laundering. In addition, FinCEN
is a leader in international efforts to build effective counter money laundering policies and
cooperation. I'll describe that part of our mission in more detail later.

During my statement I would like to talk less about the past— we all know that the threat
of organized crime exists. Rather, I would like to look to the future and engage you in a dialogue
about where we go fi'om here, about change and the risks and opportimities change presents. It is
absolutely clear that transnational crime and money laundering are going to continue to be a
challenge to law enforcement agencies around the world. We must move quickly to redesign our
strategies. I believe in the United States we have taken an important first step toward doing just
that. We in federal law enforcement have recognized that we cannot do the job alone. We must
team up with our partners — state and local authorities, as well as the financial services sector.
And, most importantly, we must network globally.

125

Review these two statements. You will leam later who said them, but look for the
overriding concem—

Quotation#l : "This(killingofbankers)continuesandit will continue in the future. The
economic situation is such that the criminal world keeps trying to win control over the
banking sphere. It was not an unmotivated murder. It was linked to big money."
Quotation #2 : "We must act firmly, quickly and effectively to protect our economies and our
societies and ensure that our financial centers attract honest business and long-term
investment. We must not let bad money drive out good."

Neitherofthesestatements were made by a law enforcement official. The first quotation
did not come fi'om the Russian Minister of Internal Affairs but was a statement fix)m the Russian
Association of Banks. The second quotation was not issued by the head of Scotland Yard, but
was part of a speech given by Kenneth Clarke, the British Chancellor of the Exchequer. Clearly
something unique is occurring in the area of money laundering. It is no longer a law
enforcement issue alone. It is becoming clearer that the problems we are facing require broader
and more sophisticated solutions.

The past decade has brought unprecedented changes to the world's economy and the
structures of government National boundaries no longer have the same meaning as they did
during the Cold War. For example, the development of the European Conununity has forever
changed the social, financial and commercial nature of Eastern and Western Europe. Trade
agreements, such as NAFTA, have nullified traditional obstacles and increased the flow of goods
and capital between the nations of this hemisphere.

126

Intensifying this trend of globalization is the unprecedented spread of democracy and free
markets throughout the world. These developments are also augmented by rapid advances in
technology that have revolutionized our methods of commerce as well as our capacity to
communicate.

Global Finance magazine reports that a decade ago, daily trading in currencies was
approaching the sum of $200 billion. Today it is more than six times as much ~ $m trillion a
day, or 100 times the volume of world trade. In addition, cross-border capital flows have
exploded during the same period. The outflow alone from the Organization for Economic
Cooperation and Development countries was as much as $654 billion in 1993. Finding illegal
activity and dirty money is placing severe strains on law enforcement's capabilities.

While there are inherent risks in this rapid pace of change, it is also evident that there are
many benefits stemming from this new world environment. Clearly there are many new
opportunities for criminals to exploit the revolutionary changes that are occurring in the world's
financial systems.

Colombia, Russia and Italy are only three examples where organized crime has
successfully infiltrated govenmients and legitimate institutions. Organized criminal entities have
hidden within these institutions, using technology to avoid detection, while building influence
and power at the citizen's expense. News reports provide a chronicle of organized crime's
growing infiltration of the Russian banking system.

Because of the evolving world environment, governments are changing the way they look
at criminal activity, economic development and foreign trade. Traditionally, governments have
compartmentalized their strategies for dealing with these subjects. Criminal activity was the

127

domain of law enforcement. Economic development was the mission of finance ministries.
Foreign trade was the realm of foreign affairs and trade ministries. The private financial systems
were separate and apart fi-om the governments.

As commerce is globalized, so is crime. Consequently, governments can no longer
compartmentalize their response to criminal, economic and trade issues. This new environment
has forced governments to think creatively, outside the envelope, to address this trend.

This is what we have been forced to do, for example, within my own organization-
FinCEN. Just as we have moved to build partnerships with the American banking industry—and
I'll talk in more detail later about some of the key components of this new relationship>~so too
have we recognized the need to build transnational partnerships through bilateral and multilateral
initiatives with our counterparts. The proceeds of crime generated here in the United States
move quickly across national botmdaries and into the world's financial systems. International
organized crime is just that—international. The federal law enforcement cases involving
international organized crime that FinCEN supports fi-equently spill over into multiple national
jurisdictions and the web of global financial services. The only way we can adequately assist our
federal law enforcement counterparts in following the trail of the multinational money launderer
is through our linkages with multilateral arrangements such as the G-7 Financial Action Task
Force and FinCEN-type organizations worldwide.

Today, I would like to outline for you five major initiatives which illustrate how
governments are trying to rise to the challenge of dramatic change in the globalized world
economy.
1. Presidential Initiatives

128

At the 50th Anniversary of the United Nations on October 22, 1995, President Clinton
outlined his initiatives to combat transnational crime including drug trafficking, arms smuggling
and terrorism. President Clinton said:

" ...I directed our government to identify and put on notice nations that tolerate money
laundering. Criminal enterprises are moving vast sums of ill-gotten gains through the
international financial system with absolute impunity. We must not allow them to wash the
blood off profits fi-om the sale of drugs, from tenor or organized crime."

He further urged the members of the United Nations to:
"...join in negotiating and endorsing a declaration on international crime and citizen safety, a
declaration which would first include a no-sanctuary pledge, so that we could say together to
organized criminals, terrorists, drug traffickers and smugglers, you have nowhere to run and
nowhere to hide."

In order to implement his goals, the President is assigning a very high priority to
negotiating agreements that ensure governments' compliance with internationally accepted anti-
money laimdering standards. FinCEN is coordinating this initiative and working with the
Departments of State and Justice, the bank regulators and the intelligence community to
complete this process.

The President's initiative recognizes that money laundering limits economic
development, foreign trade and the democratization of nations. Most importantly, his initiative
provides a framework for the world community to begin confronting this problem. Without the
cooperation of all our global neighbors, money launderers will always have a safe haven.
2. Summit of the Americas

129

In December 1994, President Clinton hosted the Summit of the Americas in Miami. As a
result of this conference, the leaders of this hemisphere's democratic nations directed their
governments to work on a cooperative plan to counter the growing economic and legal problems
of money laimdering. These governments recognized the dangerous and destructive effect
money laundering has on our economies and on private and public institutions. Money
laundering is central to profit making in the drug trade.

On December 1-2, 1995, Secretary of the Treasury Robert Rubin chaired a conference in
Buenos Aires, Argentina that was attended by Ministers from the 34 Summit of the Americas
participating nations. This conference fulfilled the directive set in Miami to promote the
effective detection, prevention and investigation of money laundering. The heads of delegation
in attendance rqpresented the leaders of Interior, Justice, and Finance Ministries as well as the
heads of Central Banks. After two days of discussions, the conference produced an agreement
among nations. FinCEN coordinated the U. S. efforts. This accord marks a vital step forward in
domestic and international efforts to track the proceeds of illicit activities and impede criminals
from developing the wealth from their activities that can give them the power to undermine the
fragile democracies in our hemisphere.

Among other things, the agreement formalizes the member nations' agreement to:

• criminalize the laundering of the proceeds from drug trafficking and other serious crimes,
and promote other laws that allow for the seizure and forfeiture of such proceeds;

• take actions to promote an effective working relationship between financial regulatory
authorities and the institutions that they oversee;

130

• enhance the tools available to law enforcement authorities as they investigate money
laundering. Included among such enhancements would be the creation of fmancial
intelligence units, similar to FinCEN, that specialize in the collection and analysis of
pertinent fmancial records in order to help track criminals' financial activities. It also
allows for cooperative methods for the reporting of suspicious fmancial transactions.
As the conference in Buenos Aires drew to a close , Secretary Rubin stated:
"Today, the nations of this hemisphere have declared there can be no sanctuary for money
launderers.... In a truly international economy, when technology allows the rapid
movement of large sums of money around the world, we must not ~ as the President said
— allow criminals to wash the blood off the profits of drug sales, or finance terrorism or
underwrite all manner of crime, by leaving open avenues for the laundering of the
proceeds of crime."

President Clinton issued a statement on the Summit in which he noted:
"America will fight the war on drugs and crime on all fi-onts, both at home and abroad....
With our neighbors in the region, we are taking an important step by targeting the cartels
and criminals who, until now, have moved vast sums of ill-gotten gains through
international fmancial systems with absolute impunity. Finally, the nations of this
hemisphere are standing as one to say 'No more.'"
3. Financial Action Task Force

The Financial Action Task Force (FATF) was established at the direction of the 1989
G-7 Economic Summit in Paris, France. FATF has become one of the key organizations that
addresses the global problem of money laundering. It is composed of 26 countries, the European

131

Community and the Gulf Cooperation Council. The task force includes representatives not only
of member nations' law enforcement agencies, but representatives of central banks and finance
ministries. In July 1995, the U.S. assumed the Presidency of FATF for a one year term and
FinCEN is serving as the lead agency for coordinating the U.S. role within FATF.

FATF has worked diligently to increase the global awareness of money laundering as
well as to establish international anti-money laundering standards. It is dedicated to promoting
the development of effective anti-money laundering controls and enhancing cooperation against
money laundering among its membership and around the world. Further, FATF provides a
forum for the exchange of information and intelligence on prevailing typologies and trends in
money laundering. Since the creation of FATF, more than two dozen countries have enacted
counter money laundering laws. Small countries, such as Slovenia have enacted legislation, and,
in fact, just last week, the Czech Republic strengthened its counter money laimdering law. In
addition, several offshore banking centers, such as the Bahamas and Panama, adopted broad,
new anti-money laundering policies and/or laws last year.

While FATF is not a legislative body or investigative task force, it serves as a policy
making body designed to generate political will. And there are very solid examples of FATF's
influence. In mid- 1994, a U.S. Customs Service investigation revealed that 100 businesses in
South America and Europe were involved in a money laimdering network. The network was
considered one of the largest used by the Cali cartel. The investigation spread from the U.S. to
France, Spain and Italy. It resulted in the arrest of 91 people, the seizure of $15 million in cash
along with 43 kilos of cocaine. The impact of FATF can be seen in the arrest of the Italian

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suspects. They were arrested pursuant to a law which had been enacted in order to comply with
FATF's internationally recognized standards. The influence of FATF bore results.

FATF "efforts, in part, have also resulted in the establishment of Financial Intelligence
Units (FIUs) in various nations around the world to protect the banking community, to detect
criminal abuse of its financial system and to ensure adherence to its laws against financial crime.
The Financial Crimes Enforcement Network is one model of an FIU and others exist in such
countries as Great Britain, France, Belgium, the Netherlands, Argentina and Australia. Where
five years ago, there were fewer than five FIUs in the world, today there are more than 15
countries with financial intelligence units focused on money laundering issues. As world policy
efforts intensify in addressing international crime. Treasury, State and Justice are assisting with
the establishment of FIUs in countries such as Poland, Panama and Ecuador.

Perhaps one of the most significant qualities of the FIUs is that many operate separately
fi-om the Justice Ministries in their respective countries. The FIUs have independent and unique
relationships with banks, central banks and law enforcement. These relationships allow FIUs to
foster the partnerships that are essential to combating money laundering and financial crime.
They bridge the private and governmental sectors in an effort to force attention to this problem
outside of the narrow bureaucratic thinking of the past.

FATF also encourages the development of partnerships with the private sector. Last
month it held its first ever Financial Services Forum. The forum was initiated as part of FATF's
mandate to foster greater international cooperation in combating money laundering by reaching
out to the financial services industry.

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Attended by nearly 70 representatives from the financial services sector in each of the 26
member nations of FATF, the Forum focused on issues of mutual interest including new money
laundering techniques, the use of emerging technologies, and the fmancial sector's views of the
FATF standards.

We are hopeful that the Forum will result in further initiatives between FATF and the
private sector.
4. Asia Pacific Economic Council

As you know the Asia Pacific Economic Council (APEC) is a forum designed to facilitate
trade and economic development in the region. Countries such as China, Singapore, Japan,
Canada and the US are members of APEC. FinCEN has worked closely with Treasury's Office
of the Assistant Secretary for International Affairs to inject an awareness of the economic
consequences of money laimdering and other financial crime into the APEC process.

At the APEC Finance ministers meeting in Bali, Indonesia in April 1995, a Joint
Ministerial Statement noted:

"It is important, in the context of strengthening capital markets, that we support international
anti-money laundering efforts in the region and encourage adherence to the international
standards and recommendations which have been developed in this area."

That statement marks the first time the APEC Ministers formalized their support for anti-
money laundering programs in Asia. This event further raised the issue of money laundering to a
macro economic level meaning that member countries will consider this issue when formulating
economic policy. Specifically, when considering capital flows between APEC nations,
governments will take into account that some of this money may come from illegitimate activity.

134

Again APEC is not a law enforcement organization. Finance and trade ministries in the
burgeoning economies of the Pacific Rim are beginning to recognize their responsibilities to
address the threats that criminals pose to the new economic world order.

In addition, FATF nations hope that APEC will support the creation of an Asian
Financial Action Task Force (AFATF). APEC's endorsement of this organization will build
awareness of financial crime issues and would potentially sway new nations to join AFATF. It is
imperative to have the cooperation of as many nations in a region as possible to thwart money
laundering.
5. Technology

Policing a society in the throes of fimdamental change means putting that change at the
top of the agenda. The computer lab and squad room seem worlds apart, but they're not. As 1
have said, the changing financial worid creates vast opportunities for criminals. Technology is a
critical part of this trend. Any individual using a relatively inexpensive computer and a common
telephone line can move enonnous masses of data around the world at nearly the speed of light
and hide data in ways that even a skilled professional cannot detect. New cyberpayments
systems are coming on line, some designed by brilliant entrepreneurs who know technology but
do not even come fiom the financial worid. So could disreputable entrepreneurs. We will need
partnerships with these new industries. We have begun.

Last September, FinCEN hosted a day-long Colloquium at the New York University
School of Law to discuss the implications of these technologies. Bank regulators, credit card
companies, CEOs fit>m the United States and Europe, as well as academics and prosecutors
attended and shared their views.

135

Another example of a partnership is the Suspicious Activity Reijorting System. Last
month we "turned the switch" implementing the new national System, administered by FinCEN
in a unique partnership with the IRS Detroit Computing Center, federal law enforcement and the
five bank regulatory agencies. In the context of technology and keeping up with the criminals,
this Suspicious Activity Reporting System will significantly improve our ability to detect
criminal financial activity, to assure that information about the activity gets to the proper law
enforcement and regulatory authorities, and to gain a broader, strategic understanding of the
national and global implications of attempts by international organized crime to subvert our
banking systems.

In addition, we are reaching out through authorities provided under the Bank Secrecy Act
to strengthen potential weak links among our non-bank financial institutions-broker dealers,
casinos, money transmitters, for example— which we have learned by experience can be used to
obscure the movement of criminal proceeds. And we are doing it in a way that actually reduces
the reporting burdens placed on private industry, and that makes the industry an equal and vested
partner in combating money laundering and other fmancial crime.

One result of the efforts I described above has been that criminals can no longer rely on
traditional means of laimdering their money— traditional avenues are being closed off. Because
of efforts like the Financial Action Task Force and the focus on non-bank financial institutions,
criminals must take greater risks to exploit the financial systems which in turn makes them more
vulnerable to detection.

The U.S. Customs Service has reported that currency smuggling is on the rise. The
smuggling of cash out of the United States has also become more expensive as criminal

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organizations have had to establish business relationships with companies involved in commerce
to source countries. In some cases they have had to purchase companies outright.

Many criminal organizations are desperate to move their cash out of the country because
its just too risky to launder it here. Presently, the safest way for criminals to repatriate criminal
proceeds to Colombia is to sell their U.S. dollars to Colombian businesses. This procedure of
hiding their money is complicated, involves many steps and is therefore expensive. According
to reports, the cost of laundering has risen from six percent in the mid 80's to more than 20
percent today. We are having an effect on the day-to-day laundering operations.
Conclusion - Cooperation

This new era is altering the roles of law enforcement, central banks and financial
institutions. No single group alone can protect the financial system from abuse. We must find
new ways to work together to ensure that criminals do not exploit the very systems that are
essential to legitimate businesses and consumers. We must all take some responsibility during
this age of globalization.

Technology makes the globalization process irreversible. Change is our challenge.
Secretary Rubin has been leading the Treasury campaign to break out of the old molds and meet
the challenge. Transnational organized crime is already exploiting change and the fading of
national boundaries. Together, we must send a clear message that money laundering will not be
tolerated in the new world economy. Only together do we have a chance of succeeding. Thank
you.

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Remarks by

Special Agent Harold D. Wankel

CHef of Operations

Drug Enforcement Administration

United States Department of Justice

House Banking and
Financial Services Committee

.WSSJ-^

Rayburn House Office Building

Room 21 28

Washington, D.C.

February 28, 1996

NOTE: This is the prepared text and may not reflect changes made in actual deUvety.

138

Remarks by Special Agent Harold D. Wankel

DEA Chief of Operations

House Banking and Financial Services Committee

Washington, D.C.

February 28, 1996

Mr. Chairman, Members of the Committee: I'm pleased to appear
before you today to discuss the threat organized criminal groups pose to
die intemational banking system. Perhaps the most notorious and
dangerous of these criminals are intemational dmg traffickers, who
launder their illegal drug money through a variety of financial systems,
including the legitimate banking industry.

The Drug Trade: An International Business

As you know, the laundering of illegal dmg profits is an integral
part of drug trafficking, as important and essential to dmg trafficking
organizations as the distribution of the illegal dmgs themselves.

Dmg organizations are truly intemational businesses, and like any
business, these organizations are fueled and motivated by huge profits that
are their hfeblood.

Dmg trafficking is a multi-billion dollar cash business, and dmg
money is essential to these enterprises. Without it, they cannot finance the
manufacturing, the transportation and the smuggUng, the distribution, the
murder and the intimidation that are essential to their illegal trade. Dmg
money laundering organizations are established to ensure the cash flow to
these illegal businesses.

Profits from the sale of illegal dmgs are recycled through laundered
investments, which take place across many borders — ^and often involve
intemational financial instimtions — ^banks and money exchange houses.
With today's sophisticated banking techniques, including die electronic
transfer of money, once the money enters into the banking system, it can be

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transferred among dozens of banks within a 24-hour period, making the
paper trail either impossible or extremely time-consuming to follow.
Globalization of the drug trade has necessitated an expansion and
sophistication of the laundering of illegal drug profits.

As the international drug markets have been expanded across all
continents and into virtually every nation, so too have methods used to
launder — or make legitimate — illegal profits of the global drug trade.
Methods of laundering dmg money vary by country and region of the
world driven by a number of factors, including the sophistication of
banking and financial centers, the existence of underground banking
systems that operate largely along ethnic lines, and strength of enforcement
pressure.

This morning, I'd like to give you an idea of the magnitude of the
problems law enforcement officers face with intemational drug money
laundering and the progress we've made with our intemational partners
toward putting a choke hold on the flow of profits back to the illegal dmg
trafficking enterprises. I will concentrate my discussion on those countries
and areas of the world where law enforcement is seeing the majority of
drug money laundering activities, beginning with the epicenter of the
cocaine trade, Colombia.

Colombia

The Cali mafia is still one of the primary recipients of drug proceeds
from the United States. Until just recently, they were responsible for 80
percent of the cocaine sold on the streets of the United States. Colombian
economists conservatively estimate that each year $4.5 billion is repatriated
to Colombia by drug traffickers. The arrests of the Cali leaders in 1995
and the emergence of crime syndicates from Mexico have impacted
somewhat the amount of U.S. dollars flowing back to Cali, but the long-
term impact has not yet been determined.

These dollars are controlled by a cadre of well-educated, skilled
accountants, who follow the rules of business drawn up by Cali mafia

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leaders to literally keep track of every dollar in their worldwide
trafficking network. The city of Cali stands as a monument to the billions
of narco-dollars the Cah mafia has returned to Colombia. Majestic,
modem skyscrapers fill the skyline of the city — many of which remain
unoccupied — none of which has outstanding mortgages.

The alliance of the Cah mafia with the trafficking organizations in
Mexico has created a highly effective method of repatriating Cali profits.
Money laundering has evolved from the late 1970's and early 1980's when
traffickers simply showed up at U.S. banks with suitcases fuU of money,
deposited it in accounts, and then had it transferred either back to
Colombia or to safe havens in Europe and offshore banks.

After legislation in the U.S. forced the reporting of deposits over
$10,000, "structuring" became the method of choice for many money
laimderers. One form of structuring is "smurfing," in which individuals
recruited by the Colombians run from bank to bank and deposit just under
$10,000 in cash. An organization of ten smurfs, each hitting ten banks a
day can convert about $1 million in cash each day into a small stack of
cashier checks of $9,000 to $9,900 each, which is much easier to get out of
the United States.

This system was cimibersome, however, and not without substantial
risk. As the Cali mafia began to monopolize the cocaine trade in the 1990's
and their profits began to soar, they tumed to bulk transfers of cash in
commercial shipments.

To solve some of their money transfer problems, Colombian
traffickers bought a fleet of large planes, such as Boeing 727s, Caravelles,
and the Turboprop Lockheed Electras, gutted them and used them to
transport multi-ton loads of cocaine to Mexico, Canada, Portugal and West
Africa for sale in the U.S. and Europe. Once they offloaded the cocaine,
they reloaded the planes with U.S. cash, sometimes as much as $20 to $30
million in drug profits, to return to Colombia.

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Bulk shipments of cash, whether in cargo planes or commercial
shipments continue to be the primary method of smuggling cash; however,
another increasingly popular method of laundering dmg proceeds is
"dollar discounting." This method involves a broker approaching a
legitimate businessman in Colombia that needs U.S. dollars to buy goods in
the United States. The money broker simply sells the drug proceeds, which
are already in the United States, to the businessman at a discounted rate up
to 20 percent. The businessman then deposits the equivalent simi in pesos
in the trafficker's bank account in Colombia and his or her agent in the
U.S. picks up the U.S. dollars. The discount rate of 20 percent is a
dramatic increase in the cost of doing business for Cali money launderers.
Previously, Colombian brokers paid between 6 and 10 percent to move
funds into Colombian accounts.

We've also seen an increase in the shipment of large quantities of
postal money orders. The money orders, with names left blank, are sent
directly to Colombia and Panama. There, the funds are sold to "casas de
cambio" — or money changing houses — for cash that will be deposited into
the traffickers' accounts. The money orders are then sold and resold
through the networks of casas. They are finally redeemed at banks outside
of Colombia. When the U.S. Post Office began to detect this money
laimdering pattern and began to seize these funds, the money movers began
to send the money orders back to the United States to be deposited into
bank accounts.

More sophisticated altematives to the banking system have also
surfaced, such as the laundering of drug money through import-export
businesses and other front companies. Elaborate import-export schemes
are being used to make drug proceeds appear as legitimate income.
Falsified export documents, biUs of lading, and invoices for goods being
shipped out of Colombia to the United States are used to justify large
payments sent to Colombia.

The use of payable-through-accounts held in U.S. banks by foreign
banks makes it difficult for law enforcement to trace the money. These
accounts can have hundreds of sub-account holders in foreign countries

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who have complete access to these accounts but who are unknown to the
U.S. bank and maybe even to the foreign bank.

The goal of all these schemes is to get the money into the banking
system, unchallenged. Last year, Colombia passed a law requiring
Colombian banks to report large currency transactions; however, once in
the system, the money can be wire transferred into a labyrinth of
worldwide accounts at a moment's notice.

The arrest and continued incarceration of major Call dmg lords have
disrupted the financial safe haven status Colombian traffickers have
enjoyed at home for many years. The enforcement of currency
requirements and anti-corruption police efforts have also placed drug assets
at risk in Colombia.

The intemational net is continually drawn tighter, limiting
opportunities for Colombian traffickers to conceal their assets with a
minimum of risk. For example, organized crime is believed to control 20
percent of the commercial banks in Russia, however, the lack of stability in
the country, as well as no long-standing basis of trust, has precluded major
investment in that alternative. Recent seizures and forfeitures in Europe,
particularly the $142 million seizure from Colombian trafficker Julio
Nasser-David in Switzerland has caused considerable concern on the part of
Colombian drug lords about putting their illegal money into European
banks.

TTie key to our future success in Colombia and Mexico, as well as the
Far East, is promoting strong money laundering laws that are strictly
enforced in all countries, and maintaining strong ties with foreign officers
in the financial centers around the world. Under Presidential Directive
Decision (FDD) 42, we are addressing those countries that are the most
egregious in offering safe havens to traffickers' illegal money.

On October 21, 1995, President Clinton used the authority given him
by the Intemational Emergency Economic Powers Act to invoke economic
sanctions against 97 companies and individuals who are involved with four

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members of the Cali drug mafia. It is now illegal for any U.S. company to
trade with these businesses or individuals. This is another tool we can use
against the drug traffickers and their illegal wealth, and we are encouraged
by the positive results we are seeing.

Mexico

As drug organizations from Mexico become more powerful in the
intemational drug trade, so too does their influence in money laundering.
Mexico returns more surplus currency to the United States than any other
country. We are now seeing millions of dollars laundered by Mexican
organizations. The primary reason for this is that the Colombians are now
paying the Mexican transportation organizations in cocaine. Considering
80 percent of the cocaine smuggled into the United States comes through
Mexico, the Mexican Federation is indeed a major player in the drug trade
and must find ways to launder and conceal the profits from their cocaine
sales.

Because of the difficulty of laundering money through traditional
financial institutions and the proximity of Mexico to the United States,
Mexican drug traffickers simply smuggle bulk shipments of cash across the
U.S.-Mexico border. In Mexico, between April and October 1995,
Mexican authorities made three seizures of U.S. currency which totalled
nearly $20 million. Last April, $6.2 million was discovered inside in a
shipment of air conditioners at the Mexico City Airport. The following
month, Mexican authorities seized $1.5 million from a Colombian money
launderer at the Mexico City Airport. And in October, Mexican officials
found $12 million inside suitcases taken from a private plane that is
believed to belong the Carrillo-Fuentes drug organization.

Each year, over 500,000 bank drafts drawn on Mexican banks enter
the U.S. One bank in Arizona determined that the average Mexican bank
draft was valued at $65,000, but that it was not unusual to clear drafts in
excess of $200,000 to $400,000. Mexican bank drafts which were not
subject to U.S. reporting requirements now must be reported and the
implementing regulations are being written. Previously, this was a

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significant method of reintroducing drug profits back into the United
States.

Although illicit enrichment is illegal and money laundering is a tiscal
offense in Mexico, money laundering is still prevalent and not a criminal
act. Banks are also required to keep records of transactions and make them
available to law enforcement authorities upon request. However, DEA
sources report that many Mexican traffickers have purchased large shares
of banks and placed members on boards of directors. As a result, many
banks keep two sets of books and bank examiners are paid off by corrupt
bank officials. In addition, much of the money that is going back into
Mexico is being invested in the infrastructure of the Mexican economy and
is not subject to seizure. Money is also invested in U.S. institutions, as well
as fmancial institutions throughout the world.

As a fiscal offense, money laundering charges provide for fines and
sentences of up to 5 years. In Mexico, the money laundering law targets
any illegal act, including tax evasion, illicit enrichment, corruption, as well
as drug trafficking.

In May 1995, Mexican Attomey General Antonio Lozano announced
that his office would be drafting a new money laundering law aimed
specifically at Mexico's major drug trafficking organizations. The bill,
which is to be presented before Congress sometime in 1996, criminalizes
money laundering under the penal code.

Currency Transaction Reporting (CTR) requirements unfortunately
are not part of the proposed legislation, however, the pending bill attempts
to fill some of the loopholes of the existing law. For example, it provides
for penalties for banks who fail to report suspicious transactions. The biU
would also reverse the burden of proof in asset forfeitures related to drug
cases. As in the United States, the defendant would have to prove that his
or her possessions were derived from legitimate sources. The primary
opposition to this proposed legislation comes from the banks and fmancial
institutions, as well as the close-knit community within Mexico that has
controlled the vast majority of business in Mexico for years.

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Southeast Asia

Unlike cocaine organizations, which are largely Latin-based and
concentrated in the Western Hemisphere, heroin traffickers are more
diverse and they operate from bases all over the world, including Southeast
Asia, Southwest Asia, the Middle East and now Colombia.

International law enforcement efforts are frustrated by the fact that
opium cultivation and heroin manufacturing primarily takes place in
countries with extreme political turmoil and developing governments.
Because of this, our nations have limited access and influence in the key
heroin source countries of Southeast and Southwest Asia.

Money laundering in this area of the world is conducted through a
complicated maze of trusted confidantes who have done business together
for generations. These underground banking systems go back years and
years to a time when family members worked away from home and needed
to get their wages back to their families in other provinces. That same
system exists today and is used to launder millions of dollars in drug
money for Southeast Asian traffickers.

I'll confine my remarks to the most active of the money laundering
countries in Southeast Asia — Singapore, Thailand, and Hong Kong.

Singapore

Although there is neither cultivation nor processing of drugs in
Singapore, it is an important financial center for narcotics-related
proceeds. Along with Hong Kong, Singapore plays a key role in the
transfer and concealment of proceeds from the sale of Southeast Asian
heroin.

While Singapore is a not a signatory to the Vienna Convention, it is a
member of the Financial Action Task Force (FATF) and continues to
maintain a tough stance towards drug trafficking. In 1993, Singapore

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passed The Drug Trafficking (Confiscation of Benefits) Act, which
provides for 7 years incarceration and a fine of $100,000.

A recent case involving the RCMP and DEA demonstrates their
commitment. In what has been called Singapore's biggest money
laundering case, between 1992 and 1995, law enforcement authorities
seized $5.4 million in Singapore currency, equal to $3.8 million in
U.S.dollars. Officials in Singapore believe that between 1989 and 1992 a
drug trafficking group funnelled approximately $100 million in U.S.
currency through one underground bank in Singapore to Bahrain and
ultimately to the organization's worldwide bank accounts. Singapore's
Commercial Affairs Department has frozen the equivalent of $20 million
U.S. dollars from previously arrested and convicted members of this
hashish and marijuana organization.

Thailand

Thailand has an extensive and efficient network of banks and
financial institutions which are used by drug traffickers to move and hide
their proceeds throughout Asia.

Thailand had a number of significant accomplishments in the past
year in terms of fighting drug-related money laundering. Last year,
approximately 138 investigations were initiated under Thailand's asset
seizure law, and last fall, the first criminal convictions and forfeiture
actions were handed down. As of mid-December, over $9 million had
been frozen compared to $1 million just one year ago.

Thailand has enacted narcotics conspiracy and asset forfeiture laws.
The asset forfeiture law stipulates that the suspects are required to prove
their assets have been acquired through legal means.

Thailand has taken major steps to become a major financial center in
Asia. The coimtry has established offshore banking and has issued a
number of licenses. Those banks can take deposits in foreign currencies
and borrow in foreign currencies from local and foreign institutions.

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Thailand has proposed a new money laundering law which addresses
only drug proceeds. The law will require recording and reporting of
significant and suspicious transactions, as well as provisions that protect
bank employees who comply with the law from retribution.

Real estate continues to be a widely used means for investing drug
proceeds. Drug traffickers have also invested in companies involved in
rubber processing, seafood packing, food products, import-export
businesses hotels, and jewelry shops. Underground banking uses these
businesses to send money around the world.

Hong Kong

With its flexible corporate laws, sophisticated banking industry and
currency and exchange controls. Hong Kong is a prime location for the
laundering of illicit proceeds by narcotics traffickers. Hong Kong,
however, has implemented asset seizure, money laimdering and organized
crime legislation. The law requires that bankers notify authorities of
suspicious transactions. After bankers received training about what to look
for, the reporting of suspicious transactions rose by 288 percent in one
year, however, no existing legislation regulates the extensive network of
imderground bankers operating throughout the country.

Other legislation allows the U.S. to request civil forfeiture of
identified proceeds of drug trafficking. Another law allows the Hong
Kong government to identify and seize proceeds generated from any crime,
not just those linked to drug trafficking.

Money laundering is a criminal offense, and the law allows the
government to trace, freeze and confiscate proceeds from convicted drug
traffickers. In 1995, Hong Kong concluded its first successful money
laundering prosecutions. Two members of a Chinese Triad were convicted
of laimdering approximately $56 million of heroin trafficking proceeds.

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We don't know what the impact on drug trafficking and money
laundering will be when Hong Kong reverts to the People's Republic of
China (PRC) in 1997.

Emerging Threats

Nigeria

Nigeria is a home base for major trafficking groups who smuggle
Southwest Asian and Southeast Asian heroin into the United States and
Europe. The Nigerians are using South Africa as transshipment point as
well.

Although Nigeria is neither a significant regional or international
financial center, nor an important tax haven or offshore banking center,
drug traffickers have laundered money in Nigerian financial institutions.
Drug profits are being pumped into the economy, as well as being
laundered for reuse in other countries.

The Nigerians use a variety of methods, including bulk smuggling in
electronic car traps, refrigerators and other merchandise which is later
sold; wire transfers to Hong Kong and Thailand; couriers; and the purchase
of "jimk commodities" that are later sold for high prices.

Foreign currency accounts in Nigerian financial institutions are not
prohibited, nor do banks have to disclose the source of the funds.

Nigerian law prohibits attempts to hide drug proceeds as well as the
transport of drug profits intemationally. Money laundering is also illegal
and carries prison terms of 15 to 25 years.

Nigerian heroin traffickers appear to be capitalizing on the
vulnerability of South African borders to create a new drug pipeline for
heroin coming out of Southwest Asia destined for the United States.
Nigerian criminal groups with histories of drug running are immigrating
into South Africa and using that country as a staging area for smuggling

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heroin into the U.S. DEA believes that South Africa may also be targeted
by drug lords from Brazil and Colombia as a potential market for cocaine
and other drugs.

Nigerians are involved in smuggling cocaine into Europe and
distributing it to middlemen who sell it in South Africa. According to
INTERPOL, an increasing number of South Africans are being arrested
throughout Europe and Africa for drug offenses. We should anticipate that
South Africa will be used by money launderers, as well.

Middle East

There is minimal reporting regarding criminal groups involved in
drug money laimdering native to or based in the Middle East, in such
coimtries as Syria, Jordan, Saudi Arabia, Qutar, Bahrain, Kuwait, Iran,
Iraq, Cyprus, United Arab Emirates, Yemen, or Oman. However,
countries such as Cyprus, Bahrain, and the United Arab Non-indigenous
ethnic groups take advantage of offshore banking centers to launder drug
proceeds.

Russia

Over the past several years there has been an increase in drug
trafficking by organized crime elements in Russia. The country has
emerged as a transit route for heroin from Southwest and Southeast Asia to
Europe and the United States, as well as for cocaine from South America to
Europe. There is an increased threat of international drug money
laundering by criminals elements in Russia as well as by criminal elements
among Russian emigres located in such areas as Europe and the United
States.

The enormous amoimt of money associated with the drug trade has
attracted Russian organized crime elements who now are involved in all
aspects of the opium and hashish industries, including cultivation,
production, distribution, and money laundering operations. Criminal
groups in Russia are exploiting the open access to the West and the lack of

150

regulations in the banking, financial and commercial sectors of their
country.

The lack of regulatory controls and legislation inhibits Russian
Government efforts to target drug money laundering operations. Russian
officials speculate that criminals have taken control of some banks and are
laundering proceeds from a wide variety of criminal activities, including
drugs. Some experts estimate that 25 percent of Moscow's commercial
banks are controlled by Organized Crime and there is speculation that
Colombian cocaine traffickers and Sicilian mafia may be using Russian
banks to launder funds.

Conclusion

Mr. Chairman, each year criminal drug organizations accumulate
war chests of billions of dollars from the sale of drugs in the United States.
This money equates to power, and the ability to produce more illegal
drugs, which are sold in our country — and countries around the world.

Over the years, one of the things we have learned is the power of
financial investigations. Drugs are a cash business and drug traffickers
must find ways to make their vast wealth appear legitimate — and money
laundering is the only way they can do that. The drug trade is a vicious
cycle, and by attacking the financial base of these organizations, we can
have a direct impact on their ability to do business.

We've seen the potential of financial investigations in two recent
global law enforcement operations to disrupt the financial operations of the
Colombian cocaine cartels — in Operation Green Ice in 1992 and Operation
Dinero in 1994.

In Operation Green Ice, law enforcement from Italy, Colombia, the
United Kingdom, Canada, Spain, Costa Rica, the Cayman Islands, and the
United States cooperated together to expose the financial infrastructure of
the Call mafia. During the first phase of Operation Green Ice, over $50
million in cash and property were seized and almost 200 people were

151

arrested worldwide, including seven of Call's top money managers. In
addition, valuable information was obtained when we gained access to
financial books and records, as well as computer hard drives and discs
containing fmancial transactions and bank account information. During the
second phase of Green Ice, nearly 14, 000 pounds of cocaine, 16 pounds of
heroin, almost $16 million in cash were seized, and over 40 people were
arrested.

During Operation Dinero — a two-and-a-half year undercover
investigation involving DEA and the IRS, as well as law enforcement and
poUce organizations in Italy, Spain, Canada, and the United Kingdom — we
penetrated the drug money laundering networks and followed the money
trails that led us to the top echelons of the Cali cocaine organizations.

Through this investigation we further established direct links among
the criminal organizations of the Italian Mafia and the Colombian cocaine
mafia. This was an historical operation also because it was the first time a
law enforcement agency established a private bank — operated by
undercover agents — ^as an investigative tool to gain insight into the seamy
netherworld of drug money laundering.

The results of Operation Dinero made it an overwhelming success.
Over $52 million and 9 tons of cocaine were seized, and 88 people were
arrested worldwide. This was cocaine that did not end up on the streets of
our cities. This is money that will not be used to further the production
and distribution of more illegal drugs. And, these are criminals who will
not continue to pursue the deadly cycle of drug-related crime and violence.

But the major result of both Operations Green Ice and Dinero was
the message it sent to the drug mafias — that the number of safe havens for
their drug money is quickly dwindling. Law enforcement agencies will
continue to use financial investigations like these two highly-successful
operations against traffickers and money launderers.

As is the case with all crime, money is the motivating factor. For
law enforcement to be effective, we must attack the money of these multi-
billion drug enterprises. We must continue to work with — and

152

strengthen— our international partnerships, and maintain strong ties with
our counterparts in the financial centers of the world. We must continue to
urge all countries to ratify the U.N. Convention and to pass more effective
money laundering and forfeiture laws. Above all, we must continue to
identify the points where the money is most vulnerable and identify what
we can do to separate traffickers from their ill-gotten gains.

Mr. Chairman and Members of the Committee, that concludes my
remarks. I'll now be happy to answer any questions you may have.

153

STATEMENT OF ROBERT E SIMS

SENIOR ADVISER

INTERNATIONAL NARCOTICS AND LAW ENFORCEMENT AFFAIRS

U.S. DEPARTMENT OF STATE

HEARING ON ORGANIZED CRIME AND BANKING

COMMITTEE ON BANKING AND FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

FEBRUARY 28, 1996

HSEBKC.TES

154

Thank you, Mr. Chairman Good morning to you and to the members of the
Committee. My name is Robert E. Sims. I am currently serving as Senior Adviser to
Robert S. Gelbard, the Assistant Secretary for International Narcotics and Law
Enforcement Affairs at the U.S. Department of State. It is a privilege to appear before
this Committee today to discuss what in the Department's view is a critically important
national security problem -~ the impact of organized crime on banking and financial
services.

Mr. Chairman, money laundering and fmancial crime have grown to become global
phenomena. Around the world we see organized criminal groups taking advantage of new
technologies, lower trade barriers, greater freedom of movement, and a global fmancial
system to further their criminal activities ~ activities that only a short time ago would have
been addressed by domestic law enforcement activity alone. Increasingly, domestic
criminals use the international fmancial system to conceal the proceeds of crimes
committed in the U.S. Of course, Mr. Chairman, crimes such as narcotics trafficking and
alien smuggling have always been transnational in nature. And the huge profits of the
drug trade continue to flow through the global fmancial system. But increasingly we see
non-drug crimes, including white collar fmancial crimes, making up a larger share of the
illicit proceeds laundered around the world. Often drug and non-drug proceeds are
commingled by launderers making it more difficult to trace proceeds to specific criminal
activities.

Mr. Chairman, the U.S. Department of State is deeply concerned about the threat
of transnational organized crime for two basic reasons. First, it is a direct threat to the
physical safety and economic well-being of Americans at home and abroad. Money
laundering is the lifeblood of narcotics trafficking and organized crime and fuels criminal

155

activity in the United States, including violence. Second, transnational organized crime
threatens America's national security and foreign policy interests in a number of regions of
the world, undermining legitimate economies and threatening emerging democracies.
President Clinton and Secretary Christopher have placed the battle against transnational
organized crime at the forefront of the U.S. foreign policy agenda and have committed
the diplomatic community to work closely with law enforcement, intelligence and other
relevant agencies to fmd effective and innovative responses to this problem. I am a small
example of that commitment myself, Mr. Chairman. I am not a career foreign service
officer, but came to State after serving 5 '/z years as an Assistant U.S. Attorney in the
District of Maryland; not only one of this coimtry's finest U.S. Attorney's offices, but a
district in which the serious impact of transnational crime can be seen firsthand. Ehiring
my time in the office we saw an influx of organized crime groups ~ the Cali Cartel,
Nigerian heroin organizations and Asian gangs, among others ~ move into Maryland,
often with violent and tragic results.

Mr. Chairman, if a state like Maryland or the U.S. in general, with its strong,
experienced law enforcement and judicial institutions, can feel the negative effects of
transnational organized crime; countries without these advantages suffer damage that is
often much more severe. The economic and political power of Russian organized crime
groups, the Colombian cartels, Mexican drug traffickers, Nigerian organizations and Asian
drug lords could not be ignored, even if they had no direct impact on United States law
enforcement interests. These organizations can through corruption, intimidation or
violence greatly inhibit legitimate business activity, erode public confidence, and
undermine democratic institutions in the countries in which they operate This in turn

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156

undermines U.S. national security. We are deeply concerned, for example, about reports
that Russianr organized crime groups are gaining control of significant sectors of the
country's economy, including actual control of certain fmancial institutions. Mr.
Chairman, we must continue and indeed redouble our efforts to eliminate these criminal
organizations and our battle against global money laundering and fmancial crime are an
important part of this work.

The State Department can and must play an important role in our effort to
combat global money laundering and the threat of transnational organized crime. There
are three areas of the Department's responsibilities I would like to focus on today: 1)
international training and technical assistance, 2) foreign policy and national security
initiatives, and 3) overseas coordination.
TRAINING AND TECHNICAL ASSISTANCE

The United States is fortunate enough to have the best trained and most
knowledgeable law enforcement officers in the world. However, in facing transnational
crime this is only part of the battle. We must work with effective counterparts overseas in
order to accomplish our goals. Unfortunately, our law enforcement officers are often
called upon to work with law enforcement officials in other countries that do not benefit
from the same level of training and have not developed the expertise we have. This is
especially a problem in the areas of money laundering and financial crime which can
involve sophisticated laundering techniques or complex frauds that require equally
sophisticated investigative work. When you consider that U.S. law enforcement officers
overseas generally operate subject to the laws and ground rules established by the host
country, restrictions that generally limit their ability to investigate and prosecute criminal

157

activities overseas as they would in the United States, it becomes readily apparent why
international law enforcement training is such an important part of our overall effort.

Mr. Chairman, we must work to develop effective working partners overseas in an
era in which international cooperation against crime is vital. Any weak leak in the money
laundering chain, for example, limits the effectiveness of the rest of the chain. Strong and
effective regulation and enforcement in the U.S., to take one example, have forced some
money launderers to ship bulk cash out of the U.S. to CQuntries in which it can be
disposed of more easily, without fear of detection. These fiinds can then be repatriated to
the U.S. using methods that are much more difficult for our law enforcement and
regulatory officials to detect. Unless these other countries become ftiU and effective
partners with the U.S., our domestic efforts will continue to be undermined.

The Department is working to develop more effective partnerships with foreign
countries in part by fiinding a range of law enforcement training programs through our
foreign assistance accounts. In undertaking international training efforts, the Department
has two basic goals in mind. The first is to build institutional expertise and capability in
foreign countries to put these countries in a better position to work cooperatively with us.
The second is to foster close working relationships between our law enforcement
authorities and those in other countries. We do this recognizing that resources are limited,
so we must work to reduce unnecessary overlap. This is especially important in the areas
of money laundering and fmancial crime because investigative and regulatory authority is
spread among a number of agencies in the U.S., as well as many foreign countries. It is
also important, of course, that these programs be administered with our broader foreign
policy interests in mind. To accomplish these objectives, the State Department is working

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very closely with federal law enforcement agencies to establish priorities and implement
effective and coordinated training programs.

A good example of this effort is our current training program in the former Soviet
Union and Central Europe. The State Department chairs a working group on law
enforcement training consisting of all of the relevant federal law enforcement and
regulatory agencies. This group conducts needs assessments, analyzes U.S. priorities and
develops training programs that serve both U.S. interests as well as those of the various
countries in the region. Using Freedom Support Act (FSA) and Supporting Eastern
European Democracy Act (SEED) funds. State is planning to fund a number of money
laundering and financial crime training in Russia, Estonia, the Czech Republic, Poland and
elsewhere this year.

Mr. Chairman, as you may know, the State Department also helped to establish
an International Law Enforcement Academy in Budapest last year, working with the FBI
and other federal law enforcement agencies. We will also be funding money laundering
and financial crime training courses for the academy this year. ILEA is another good
example of the State Department and federal law enforcement working together to
improve international cooperation.

While the Department will likely not have the resources we had hoped this year,
we nonetheless plan to work with federal law enforcement to expand our money
laundering and financial crime efforts to key countries outside of the NIS and Central
Europe. In doing so, we will use our successful work in the NIS and Central Europe as
the model.

159

FOREIGN POLICY AND NATIONAL SECURITY INITLVTIVES

Mr. Chairman, we are also using the full foreign policy and national security
apparatus to advance our law enforcement and national security interests. We are raising
the issue of money laundering and financial crime at the bilateral and multilateral level to
help improve international cooperation in these areas. Indeed, improving law enforcement
cooperation on a bilateral and multilateral basis is one of our primary foreign policy
interests. One example of this effort is our ongoing discussion with the G-7 countries and
the Russian government (i.e., the P-8). At last year's G-7 Summit in Halifax, the U.S.
advocated strong positions on transnational crime, including the establishment of an
experts group to examine international responses and make specific recommendations to
improve law enforcement cooperation internationally. An interagency team, led by State
and including most of the agencies you will hear from today, has participated in the
resulting talks with their foreign counterparts over the course of the last year. And though
the talks have at times been difficult, we are making real progress in a number of areas.
We are considering a range of recommendations that should improve international
cooperation against money laundering and fmancial crimes.

State has worked very closely, Mr. Chairmaq with Treasury, Justice and other
agencies in a full range of international initiatives. For example, we worked closely with
Treasury in the Summit of the Americas process and were pleased with the progress we
made. We intend to continue our joint efforts to ensure that what the nations of this
hemisphere agreed to on paper will become a reality on the ground. We are also
continuing our efforts with Treasury to support the work of the Financial Action Task
Force. Indeed, FATF, as the leading anti-money laundering organization in the world is a

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very important source for our bilateral and multilateral efforts to control money
laundering. It provides international standards against which even non-members can be
measured. Treasury's efforts to ensure that the FATF recommendations fully reflect the
best advice the international community can give on money laundering countermeasures is
an important reform State will fully support. We are also pushing a reform agenda in the
United Nations Crime Commission to help it become a more effective voice for reform
and international cooperation in the money laundering and fmancial crime areas.

You have heard, Mr. Chairman, about the President's important money laundering
initiative. We have been working closely with Treasury and other agencies to develop this
initiative and we plan to work vigorously to implement it. I wanted also to mention
another of the President's important and innovative initiatives in this area — the use of the
International Emergency Economic Powers Act against the Cali Cartel. lEEPA allowed
the President to freeze assets of the designated Cartel leaders, their associates and front
companies in the U.S., but more importantly, it prohibits U.S. persons from doing business
with these individuals and entities. This greatly restricts the ability of these front
companies to conduct business as usual in or with the United States. Surprisingly,
published reports also suggest that Colombian businesses, including fmancial institutions,
have been emboldened by the President's action and have been refusing to do business
with these Cartel front companies as well. Mr. Chairman, the use of lEEPA and the
President's money laundering initiative are the type of innovative responses to organized
crime we need. Indeed, we are working on an interagency basis, as required by the
President, to determine whether we can use lEEPA to target other criminal organizations.

161

OVERSEAS COORDINATION

Finally, Mr. Chairman, I would like to address the issue of overseas coordination
especially State support for overseas law enforcement activity. Whether they seek to
enforce U.S. law overseas as authorized by law or serve in a liaison capacity with
counterpart agencies abroad, the placement of U.S. law enforcement personnel abroad is
an important response to the growing threat of transnational organized crime. Indeed, Mr.
Chairman, our missions overseas are the forward bases for protecting and advancing U.S.
national interests, including our law enforcement interests.

Both the Secretary of State and the U.S. Chief of Mission have statutory
responsibilities for coordinating the activities of U.S. government personnel abroad. As
the President's personal representative in country, the role of the Chief of Mission is
especially important because he or she is charged by the President and statutorily
responsible for the direction, coordination and supervision of all USG personnel in
country, except certain military personnel. The Chief of Mission must play an important
role in our fight against transnational organized crime.

Mr. Chairman, my purpose for mentioning these responsibilities is that I fear the
Department's ability to support these important law enforcement functions is jeopardized
as mission resources are reduced. We currently have some 1600 law enforcement
personnel overseas and virtually all of these agencies are seeking to expand their presence.
DEA, FBI, Secret Service, INS, Customs, IRS, ATF, FAA, and a number of other
agencies have important law enforcement functions to perform abroad. Unfortunately,
Chiefs of Mission increasingly must consider cost and resource availability in making
decisions to enhance our law enforcement presence overseas. Because the Department's

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162

own resources are shrinking even as law enforcement agencies seek to expand their
presence in U.S. missions, Chiefs of Mission must carefully consider such issues as space
limitations, costs and manageability when assessing whether to approve new positions,
even where they agree that enhanced numbers would otherwise be desirable. I therefore
urge the members of the Committee, when looking at the issue of law enforcement
activity overseas, not to forget the State Department's responsibilities and the resources it
needs to support these activities. ,
CONCLUSION

As with other transnational crimes, Mr. Chairman, there is no simple solution to
the threat of global money laundering and fmancial crime. I believe we have to look at
each of the areas I have discussed here today — international training, foreign policy
initiatives and overseas law enforcement activity ~ as part of a comprehensive response.
The Department of State looks forward to working with the law enforcement and
intelligence communities and with the Congress to combat global money laundering and
fmancial crime.

163

DEPARTMENT OF THE TREASURY

UNITED STATES SECRET SERVICE

Robert H. Rasor
Deputy Assistant Director
Washi/tgton, D. C.
(202J 4355716

Mr. Rasor is the Deputy Assistant Director for Investigations at the U.S. Secret Service
Headquarters in Washington, D.C., responsible for coordination and administration of Investigative
Operations, both Foreign and Domestic. Mr. Rasor received a Bachelor of Arts Degree from Iowa
Wesleyan College and a Juris Doctor Degree from Memphis State University. Further, Mr. Rasor most
recently completed the Senior Executive Fellows Program at Harvard University and the Contemporary
Executive Development Program at George Washington University.

Mr. Rasor's previous assignment was Special Agent in Charge of the Financial Crimes Division,
where he was responsible for the world-wide oversight, direction and coordination of criminal
investigations pertaining to: Financial Institution Fraud, Access Device/Credit Card/Telemarketing
Fraud, Telecommunications Fraud, Computer Fraud, Electronic Funds Transfer, Nigerian/Asian
Organized Crime, False Identification, Government Program Fraud and other related crimes.

Mr. Rasor has also served as Special Agent in Charge of the Special Investigations and
Security Division at Secret Sen/ice Headquarters where he was responsible for internal security
matters relating to physical and technical security. This Division was responsible for security surveys
of the White House Complex, U.S. Mints, Ft. Knox, and other sensitive locations throughout the
world. Mr. Rasor has had extensive experience as a Special Agent in St. Louis and New York City,
having been in charge of the Fraud, Forgery, Special Investigations, Intelligence and Protection Squads
and serving as Assistant to the Special Agent in Charge of the New York Field Office.

During Mr. Rasor's tenure he has traveled extensively overseas while assigned to the White
House Presidential Protective Division, providing advance and on site protection for numerous
Presidents and Vice Presidents of the United States and foreign heads of state visiting the United
States.

Mr. Rasor serves on the Board of Advisors for the International Association of Credit Card
Investigation, Board of Directors of the Economic Crimes Institute at Syracuse University, American
Society for Industrial Security White Colrar Crimes Committee, American Bankers Association Security
Committee, the International Association Chiefs of Police Financial Crimes Committee and the National
Performance Review Electronic Benefits Transfer Task Force. Mr. Rasor has received numerous
awards from government, law enforcement agencies and industry for his leadership contributions.

In October 1994, Mr. Rasor received the Secretary's Annual Award for Outstanding
Performance in the area of Financial Crimes from U.S. Treasury Secretary Lloyd Bensten. In October
1995, Mr. Rasor received the Vice President's award for excellence in Financial Crimes Management
from Secretary of the Treasury Robert E. Rubin.

164

TESTIMONY OF ROBERT H. RASOR

DEPUTY ASSISTANT DIRECTOR
UNITED STATES SECRET SERVICE

COMMITTEE ON BANKING AND FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

FEBRUARY 28, 1996

MR. CHAIRMAN, THANK YOU FOR THE OPPORTUNITY TO ADDRESS THIS
COMMITTEE ON "THE THREAT POSED BY ORGANIZED CRIMINAL GROUPS TO
FINANCIAL SYSTEMS", COMMERCE SYSTEMS, AND COUNTLESS INDIVIDUAL
VICTIMS, BOTH IN THE UNITED STATES AND ABROAD.

I AM REPRESENTING THE UNITED STATES SECRET SERVICE TODAY IN
MY CAPACITY AS DEPUTY ASSISTANT DIRECTOR FOR THE OFFICE OF
INVESTIGATIONS .

AS YOU KNOW, THE UNITED STATES SECRET SERVICE WAS ORIGINALLY
ESTABLISHED IN 1865, SOLELY TO SUPPRESS COUNTERFEIT CURRENCY IN
THE UNITED STATES. TODAY THE SECRET SERVICE HAS INVESTIGATIVE
JURISDICTION FOR A HOST OF CORE FINANCIAL CRIMES COMMONLY USED BY
ORGANIZED GROUPS TO ATTACK FINANCIAL SYSTEMS ON A NATIONAL AND
INTERNATIONAL SCALE.

THE UNITED STATES SECRET SERVICE HAS SEEN THE EMERGENCE OF
SEVERAL INTERNATIONAL ORGANIZED CRIMINAL GROUPS SYSTEMATICALLY
ATTACKING THE FINANCIAL SYSTEMS THROUGH FINANCIAL INSTITUTION
FRAUD, COUNTERFEITING OF U.S. CURRENCY, CREDIT CARD FRAUD,

165

ADVANCE FEE FRAUD, COMPUTER FRAUD, AND TELECOMMUNICATIONS FRAUD.
ALL OF THOSE VIOLATIONS ARE INVESTIGATIVE PROGRAM AREAS WITHIN
THE UNITED STATES SECRET SERVICE, IN WHICH WE HAVE ACCUMULATED
SPECIFIC EXPERTISE AND ONGOING PRO- ACTIVE INITIATIVES.

I WOULD LIKE TO FOCUS OUR DISCUSSION TODAY ON (1)
IDENTIFICATION OF THE GROUPS, (2) CURRENT TRENDS OF THE GROUPS
(3) SECRET SERVICE RESPONSE AND (4) RECOMMENDATIONS.

GROUPS :

AT THE ONSET THE SECRET SERVICE DISTINGUISHES BETWEEN
STRUCTURED, TRADITIONAL ORGANIZED CRIME SUCH AS LA COSTA
NOSTRA (LCN) , AND WHAT ARE NOW COMMONLY REFERRED TO AS ORGANIZED
CRIMINAL GROUPS. THE GROUPS INCLUDE: NIGERIAN CELLS, ASIAN TRIADS,
RUSSIAN CRIMINAL NETWORKS, MIDDLE - EASTERN ORGANIZED CRIME GROUPS
(LEBANESE, SYRIAN, IRANIAN, ISRAELI ETC.) AND SOUTH AMERICAN
CARTELS. OTHER DOMESTIC GROUPS HAVE BEEN ASSOCIATED ALONG
PHILOSOPHICAL LINES, SUCH AS POSSE COMITATUS, AND THE ARYAN NATION
AND/OR WHITE SUPREMACISTS. MANY OF THESE GROUPS DO NOT FOLLOW
PRIOR PATTERNS ASSOCIATED WITH ORGANIZED CRIME IN RELATION TO
STRUCTURE. HOWEVER, THESE GROUPS DO SUPPORT THEMSELVES INTERNALLY
THROUGH ETHNIC ASSOCIATION WHILE EXTERNALLY CREATING ENCLAVES OR
CELLS FOR CRIMINAL OPERATIONS ON A DOMESTIC AND INTERNATIONAL
SCALE.

IT HAS BECOME APPARENT TO THE SECRET SERVICE THAT TRADITIONAL
INVESTIGATIVE TECHNIQUES ARE DIFFICULT TO EMPLOY. THEREFORE, NEW

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TECHNIQUES ARE NEEDED TO ADDRESS THE PROBLEM OF THE MANY AND
DIVERSE ORGANIZED CRIMINAL ELEMENTS ATTACKING U.S. FINANCIAL
SYSTEMS. THE GROUPS ARE INVOLVED IN: THE MANUFACTURE AND
DISTRIBUTION OF COUNTERFEIT CREDIT CARDS AND FALSE IDENTIFICATION
DOCUMENTS; DESK TOP PUBLICATION OF COUNTERFEIT U.S. GOVERNMENT,
FOREIGN, AND COMMERCIAL OBLIGATIONS AND SECURITIES; INTRUSIONS INTO
THE INTERNATIONAL COMPUTER NETWORKS (INTERNET); THE LAUNDERING OF
ILLICIT PROCEEDS THROUGH INTERNATIONAL WIRE TRANSFERS; AND THE
ALTERATION OF CELLULAR PHONE MICROCHIPS JUST TO NAME A FEW.

TRENDS:

ONE COMMONLY RECOGNIZED ASPECT OF THESE ORGANIZED CRIMINAL
GROUPS IS THAT THEY HAVE BECOME "EXPERTS" IN THEIR CRIMINAL FIELD.
IN SHORT, THEY DO THEIR HOMEWORK ON FINANCIAL SYSTEMS AND IDENTIFY
WEAKNESSES IN SYSTEMS THAT ALLOW THEM FRAUDULENT ACCESS TO MILLIONS
OF DOLLARS. THE ATTACKS AND CRIMINAL SUCCESSES OF THE ORGANIZED
GROUPS ARE MORE OFTEN THAN NOT, A RESULT OF CAREFUL PLANNING,
PRECISE EXECUTION OF THE SCHEME, AND ULTIMATELY TAKING ADVANTAGE OF
FINANCIAL SYSTEMS ORIGINALLY DESIGNED TO BE CONSUMER OR CUSTOMER
FRIENDLY.

WHILE THE SOPHISTICATION AND ORGANIZATIONAL LEVEL OF
THESE GROUPS INCREASE IN ALL AREAS OF FINANCIAL CRIMES, ONE OF THE
MOST DISTURBING ASPECTS THE SECRET SERVICE HAS OBSERVED IS THE
PROLIFERATION OF THE SO CALLED "WHITE COLLAR" CRIMINAL GROUPS'
INVOLVEMENT IN THE MORE VIOLENT TYPES OF CRIMINAL ACTIVITIES. THE
SERVICE BELIEVES IT IS A COMMON MYTH THAT CREDIT CARD FRAUD, BANK

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FRAUD, AND THE COUNTERFEITING OF U.S. CURRENCY ARE COMPLETELY
"WHITE COLLAR" CRIMINAL OFFENSES WITH NO RELATIONSHIP TO THE
VIOLENCE VIEWED ON NIGHTLY NEWS PROGRAMS.

MANY PEOPLE STILL BELIEVE THAT THE MAJORITY OF THESE "WHITE
COLLAR" SCHEMES ARE BEING PERPETRATED BY INDIVIDUALS AS AN END IN
THEMSELVES. IN FACT, THE SECRET SERVICE AND OTHER LAW ENFORCEMENT
INVESTIGATORS ARE CONSTANTLY ENCOUNTERING ORGANIZED CRIMINAL GROUPS
WHO ARE TARGETING U.S. AND OTHER NATIONS FINANCIAL SYSTEMS WITH A
MULTITUDE OF FRAUDULENT SCHEMES DESIGNED TO SUPPORT VIOLENT
CRIMINAL LIFESTYLES. THE SECRET SERVICE HAS COME TO RECOGNIZE THE
CLEAR RELATIONSHIP BETWEEN "WHITE COLLAR" CRIME AND THE
PERPETRATORS OF INHERENTLY VIOLENT ACTIVITIES SUCH AS MURDER, DRUG
TRAFFICKING, EXTORTION, PURCHASE AND EXCHANGE OF FIREARMS AND
EXPLOSIVES, MONEY LAUNDERING, ALIEN SMUGGLING, CAR THEFT AND
PROSTITUTION.

FALSE IDENTIFICATION IS A KEY ELEMENT IN THE SUCCESS OF
ORGANIZED CRIMINAL GROUPS IN ATTACKING FINANCIAL SYSTEMS ON A
GLOBAL SCALE. THE USE OF FALSE IDENTIFICATION AS A VEHICLE TO
COMMIT FINANCIAL CRIMES HAS BECOME A PRIORITY CONCERN TO THE SECRET
SERVICE AND THE FINANCIAL COMMUNITY. IN 1994, THE SECRET SERVICE
INVESTIGATED FINANCIAL CRIMES CASES TOTALING $1.5 BILLION. A
MAJORITY OF THESE CASES INVOLVED FALSE IDENTIFICATION AS A
PREREQUISITE TO THE CRIME.

IN THE FINANCIAL CRIMES ARENA, THE NUMBER ONE CONCERN OF BANKS

168

TODAY IS THE USE OF COMPUTERS, DOCUMENT SCANNERS, LASER PRINTERS,
AND DESKTOP PUBLISHING SOFTWARE PROGRAMS TO COUNTERFEIT FALSE
IDENTIFICATION, CORPORATE CHECKS, LETTERS OF CREDIT , AND OTHER
COMMERCIAL BANKING DOCUMENTS . ORGANIZED CRIMINAL GROUPS USE FALSE
IDENTIFICATION TO OPEN BANK ACCOUNTS TO CONDUCT FRAUDULENT
ACTIVITY, TO APPLY FOR GOVERNMENT BENEFITS, OR TO NEGOTIATE
COUNTERFEIT OR STOLEN CHECKS.

ALTHOUGH COUNTERFEITED "BREEDER" DOCUMENTS, SUCH AS BIRTH
CERTIFICATES AND SOCIAL SECURITY CARDS, ARE USED TO ESTABLISH
IDENTITY IN THE COMMISSION OF FINANCIAL CRIMES, IT IS THE
COUNTERFEIT DRIVERS LICENSE THAT IS MOST OFTEN USED. THAT IS DUE TO
THE FACT THAT DURING THE COURSE OF BUSINESS THE DRIVERS LICENSE IS
THE MOST POPULAR AND WIDELY ACCEPTED CREDENTIAL IN SUPPORT OF A
FINANCIAL TRANSACTION.

SECRET SERVICE RESPONSE:

IN 1984, AFTER THE SECRET SERVICE RECEIVED ADDITIONAL
JURISDICTIONAL RESPONSIBILITY FDR CREDIT CARD FRAUD AND FALSE
IDENTIFICATION, WE BEGAN TO ENGAGE THE NIGERIAN CRIMINAL NETWORK
ON A REGULAR BASIS. THESE ORGANIZED CRIMINAL GROUPS PROVED TO BE
ADEPT AT DEVELOPING COMPLEX SCHEMES TO DEFRAUD FINANCIAL
INSTITUTIONS AND THE GENERAL PUBLIC. THE U.S. SECRET SERVICE
FIRST ENCOUNTERED MEMBERS OF THESE GROUPS IN THE COURSE OF
ENFORCING OUR TRADITIONAL JURISDICTIONS OVER THE COUNTERFEITING
OF U.S. CURRENCY AND THE FORGING OF GOVERNMENT SECURITIES.
NIGERIAN INVOLVEMENT IN ALL TYPES OF FRAUD AND THEIR ABILITY TO

169

USE MULTIPLE IDENTITIES AND CREATE FALSE DOCUMENTATION HAS MADE
THE WEST AFRICAN CRIMINAL ELEMENT A SIGNIFICANT FACTOR FOR LAW
ENFORCEMENT AUTHORITIES. WEST AFRICAN ORGANIZED CRIME WAS
RECOGNIZED TO BE A RAPIDLY GROWING PHENOMENA THROUGHOUT THE
WORLD. IN 1986, THE SENATE PERM/^NENT SUBCOMMITTEE ON
INVESTIGATIONS DETERMINED, AS A RESULT OF HEARINGS ON EMERGING
ORGANIZED CRIMINAL GROUPS, THAT A FORMIDABLE CRIMINAL NETWORK WAS
FORMING WITHIN THE LARGE COMMUNITY OF NIGERIAN NATIONALS LIVING
IN THE UNITED STATES. IN FY 1992, THE TREASURY, POSTAL SERVICE
AND GENERAL GOVERNMENT APPROPRIATIONS SUBCOMMITTEE PROVIDED FUNDS
TO THE SECRET SERVICE, WHICH WERE EARMARKED FOR A WEST AFRICAN
TASK FORCE INITIATIVE. THE RESULTING TASK FORCES REMAIN IN
EXISTENCE .

IN ADDITION TO THE TRADITIONAL FRAUD SCHEMES USED BY THE
WEST AFRICAN CRIMINAL ELEMENT, THEY ARE NOW RECOGNIZED FOR THEIR
ABILITIES TO TRANSPORT CURRENCY AND HEROIN IN AND OUT OF THE
UNITED STATES. IT IS SUSPECTED THAT MUCH OF THE MONEY OBTAINED
THROUGH THE FRAUDULENT ACTIVITY CONDUCTED BY THE WEST AFRICANS IS
IN SUPPORT OF THEIR DRUG TRAFFICKING.

THE SECRET SERVICE HAS TAKEN A PROACTIVE APPROACH TO THE
WEST AFRICAN ORGANIZED CRIME PROBLEM BY ESTABLISHING AND
MAINTAINING TASK FORCES THROUGHOUT THE UNITED STATES WHOSE FOCUS
INCLUDES THE INVESTIGATION OF NIGERIAN PERPETRATED FRAUD. THESE
SECRET SERVICE LED TASK FORCES ARE LOCATED IN BOSTON, NEW YORK,
NEWARK, BALTIMORE, WASHINGTON, p.C, ATLANTA, MIAMI, CHARLOTTE,

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HOUSTON, DALLAS, AND CHICAGO. MEMBERS OF THESE TASK FORCES
INCLUDE U.S. CUSTOMS, IMMIGRATION AND NATURALIZATION SERVICE,
U.S. POSTAL INSPECTORS, AS WELL AS MEMBERS OF LOCAL, COUNTY AND
STATE POLICE AGENCIES.

TO ASSIST THE TASK FORCES IN THEIR INVESTIGATIONS, THE
SECRET SERVICE ACTIVELY PARTICIPATES IN THE COMBINED AGENCY
BORDER INTELLIGENCE NETWORK (CABINET) , THE FINANCIAL CRIMES
ENFORCEMENT NETWORK (FINCEN) , AND THE MID-ATLANTIC, GREAT LAKES
ORGANIZED CRIME ENFORCEMENT NETWORK (MAGLOCLEN) . THESE DATA
BASES, AS WELL AS THE SECRET SERVICES' INVESTIGATIVE SUPPORT
DIVISION, THE DRUG ENFORCEMENT AGENCY, AND THE U.S. CUSTOMS TECS
SYSTEM PROVIDE AN EXCELLENT BASIS FOR OBTAINING INFORMATION AND
ANALYSIS OF DATA TO HELP OUR STREET AGENTS TAKE A PROACTIVE
APPROACH TO TARGETING WEST AFRICAN ORGANIZED CRIMINAL GROUPS.

CURRENTLY, THE MOST PROLIFIC FRAUD SCHEME BEING PERPETRATED
BY NIGERIAN ORGANIZED CRIMINAL GROUPS IS WHAT IS KNOWN AS ADVANCE
FEE FRAUD, OR "419" FRAUD. THE "419" REFERS TO A NIGERIAN FRAUD
STATUTE. NIGERIANS, PURPORTING TO BE OFFICIALS OF THEIR
GOVERNMENT, BANKING SYSTEM, OR OIL IMPORT/EXPORT COMPANIES HAVE
MAILED OR FAXED LETTERS TO INDIVIDUALS AND BUSINESSES ALIKE IN
THE UNITED STATES ENTICING CITIZENS TO PARTAKE OF MILLION DOLLAR
WINDFALLS, IF THEY WOULD RESPOND WITH PERSONAL IDENTIFIERS SUCH
AS SOCIAL SECURITY NUMBERS, BANK ACCOUNT NUMBERS, AND PHONE
^fUMBERS. THE INDIVIDUAL BECOMES A VICTIM WHEN THEY FALL FOR THE
SCHEME AND WIRE TRANSFER FEES "UP FRONT" TO PAY FOR BRIBES,

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TAXES, AND LEGAL FEES, WHICH THE NIGERIAN HAS SAID MUST BE PAID
BEFORE THE DEAL CAN BE CONSUMMATED. THIS TYPE OF FRAUD HAS BECOME
SO WIDESPREAD THROUGHOUT THE UNITED STATES AND INTERNATIONALLY,
THAT THE SECRET SERVICE HAS INSTITUTED AN OPERATION THAT TRACKS
THESE LETTERS AND VICTIMS. THERE ARE CURRENTLY OVER 20,000
ENTRIES IN THIS DATA BASE AND IJTOICATIONS ARE THAT AMERICAN
CITIZENS HAVE LOSSES IN THE MILLIONS OF DOLLARS. AMERICANS HAVE
GONE TO NIGERIA IN HOPES OF RECOVERING THEIR MONEY AND HAVE BEEN
FOUND MURDERED AFTER BEING REPORTED MISSING.

AGENTS ASSIGNED TO OUR TASK FORCE IN NEWARK RECENTLY
COMPLETED A JOINT INVESTIGATION WITH THE DRUG ENFORCEMENT
ADMINISTRATION WHERE THEY PROVED THAT PROCEEDS FROM THIS TYPE OF
FRAUD WERE BEING USED TO FUND A HEROIN DISTRIBUTION RING AND A
STOLEN CAR OPERATION IN THE NEW JERSEY/NEW YORK METROPOLITAN AREA
WITH TIES DIRECTLY INTO LAGOS, NIGERIA. LOSSES IN THIS CASE
TOTALED $5 MILLION DOLLARS. ANOTHER RECENT "419" CASE RESULTED
IN THE ARREST OF ANOTHER NIGERIAN NATIONAL ACCUSED OF INVOLVEMENT
IN HEROIN TRAFFICKING WITH THE ASSISTANCE OF FUNDS DERIVED FROM
"419" FRAUD. THE 419 FRAUD ACTIVITY RESULTED IN A $12 MILLION
LOSS TO INTERNATIONAL VICTIMS.

MURDERED AMERICAN CITIZENS

AN AMERICAN CITIZEN WAS SHOT TO DEATH IN LAGOS LAST SUMMER
IN RELATION TO "419" FRAUD. HIS PARTICULAR CASE CENTERED AROUND
THE PURCHASE OF NIGERIAN CRUDE OIL FOR A DRASTICALLY REDUCED
RATE. THE SUBJECT HAD $92,000 IN NEGOTIABLE INSTRUMENTS IN A

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SAFETY DEPOSIT BOX THAT WAS NOT COMPROMISED. THE SUBJECT DID NOT
HAVE A VALID VISA WHICH INDICATES HE WAS SMUGGLED INTO LAGOS BY
HIS NIGERIAN HOSTS. OTHER GOVERNMENTS HAVE REPORTED THEIR
CITIZENS MURDERED OR MISSING IN PAST YEARS.

AMERICAN EMBASSY - LAGOS

A PILOT PROJECT INITIATED BY THIS SERVICE IN 1995, TO
PERIODICALLY ASSIGN AGENT PERSONNEL TO THE AMERICAN EMBASSY IN
LAGOS TO ASSESS THE MAGNITUDE OF THE "419" ISSUE RESULTED IN THE
ASSISTED EXTRICATION OF SEVEN AMERICAN VICTIMS IN JUST ONE MONTH.
SOME OF THE VICTIMS WERE 60 AND 70 YEARS OF AGE AND WOULD HAVE
MOST PROBABLY FACED SOME FORM OF INTIMIDATION TO CONTINUE THEIR
PARTICIPATION IN THIS SCAM. FIGURES PROVIDE BY THE AMERICAN
EMBASSY INITIALLY INDICATED UP TO 40 AMERICAN CITIZENS PER MONTH
COMING TO THE ATTENTION OF THE EMBASSY SEEKING RELIEF FROM 419
SCHEMES. SINCE THIS SERVICE'S AGGRESSIVE STANCE TOWARD THIS
PROBLEM THAT FIGURE HAS BEEN REDUCED TO AN AVERAGE OF ONLY 4 PER
MONTH.

INTERDICTION AND EDUCATION

THROUGH OUR CONTINUING EFFORTS TO BRING THE "419" SCHEMES TO
THE ATTENTION OF THE GENERAL PUBLIC, FINANCIAL COMMUNITY, AND THE
LAW ENFORCEMENT COMMUNITY WE HAVE BEEN SUCCESSFUL IN INTERDICTING
APPROXIMATELY 400 INDIVIDUALS FROM BEING VICTIMIZED BY "419"
SCHEMES .

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OUR AGENTS HAVE LOCATED VICTIMS IN FOREIGN VENUES AND HAVE
ASSISTED IN THEIR REMOVAL FROM A POTENTIALLY DANGEROUS
ENVIRONMENT, AND THEIR RELOCATION BACK TO THE UNITED STATES.
WE HAVE EVEN GONE TO AIRPORTS AND STOPPED VICTIMS WITH
THOUSANDS OF DOLLARS IN THEIR POSSESSION FROM EMBARKING ON
FLIGHTS THAT WOULD EVENTUALLY PLACE THEM IN HARMS WAY. WE
CONTINUE TO WORK CLOSELY WITH TJIE U.S. STATE DEPARTMENT, THE
AMERICAN EMBASSY IN NIGERIA, INTERPOL, SCOTLAND YARD AND LAW
ENFORCEMENT OFFICIALS THROUGHOUT THE WORLD IN AN ATTEMPT TO END
THESE FRAUDULENT PRACTICES.

ASIAN ORGANIZED CRIMINAL GROUPS CONTINUE TO BE A SIGNIFICANT
PROBLEM IN THE UNITED STATES. THE U.S. SENATE PERMANENT
SUBCOMMITTEE ON INVESTIGATIONS HELD HEARINGS LAST YEAR ON THE
PROBLEMS ASSOCIATED WITH VARIOUS ASIAN TRIADS, SUCH AS THE BIG
CIRCLE GANG, 14K, AND SUN YEE ON. THE COMMITTEE IDENTIFIED
HEROIN TRAFFICKING, MONEY LAUNDERING, AND CREDIT CARD FRAUD AS
ILLEGAL ACTIVITIES IN WHICH THE TRIADS PARTICIPATED.
INVESTIGATIONS INVOLVING ASIAN GANGS CONTINUE TO GROW AT A RAPID
PACE WITH THE MAJORITY OF THE INVESTIGATIONS CENTERED ON THE WEST
COAST AND NEW YORK CITY. THE SECRET SERVICE HAS WORKED CLOSELY
WITH THE ROYAL HONG KONG POLICE AND OTHER INTERNATIONAL POLICE
AGENCIES IN ATTEMPTING TO STEM ASIAN ORGANIZED CRIMINAL ACTIVITY
AS IT RELATES TO TREASURY VIOLATIONS.

RECENTLY, THIS COOPERATIVE EFFORT LED TO THE ARREST OF TAM
WEI-KEUNG IN THE UNITED STATES (OPERATION PLASTIC DRAGON) . KEUNG

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WAS THE LEADER OF THE 14K ASIAN TRIAD AND WAS INVOLVED IN
INTERNATIONAL CREDIT CARD FRAUD. LOSSES ATTRIBUTED TO TAM AND HIS
TRIAD HAVE EXCEEDED $65 MILLION. THE SECRET SERVICE HAS WORKED
EXTENSIVELY WITH THE ROYAL CANADIAN MOUNTED POLICE TARGETING
ASIAN ORGANIZED CRIME TRIADS SUCH AS THE "BIG CIRCLE BOYS", "THE
PLYING DRAGONS", AND THE LOTUS CHINESE GROUP. THESE TRIADS HAVE
BEEN EXTREMELY ACTIVE IN COUNTEflFEITING U.S. CURRENCY, FINANCIAL
INSTITUTION FRAUD, CREDIT CARD FRAUD, AS WELL AS NARCOTICS
TRAFFICKING, GUN RUNNING, AND OTHER VIOLATIONS.

CURRENTLY, OUR SANTA ANA, CALIFORNIA OFFICE CONTINUES TO
INVESTIGATE AN ORGANIZED GROUP OF VIETNAMESE NATIONALS (OPERATION
PAPER DRAGON) WHO ARE RESPONSIBLE FOR COUNTERFEITING CORPORATE
CHECKS IN WHICH FINANCIAL INSTITUTIONS HAVE SUFFERED IN EXCESS OF
$20 MILLION IN LOSSES. OVER 100 ARRESTS HAVE BEEN MADE BY THE
SECRET SERVICE IN CONNECTION WITH THIS INVESTIGATION. IN ANOTHER
CASE "OPERATION REPAYMENT" ANOTHER ORGANIZED GROUP OF VIETNAMESE
NATIONAL WERE ARRESTED IN A CASE INVOLVING $40 MILLION IN LOSSES
TO THE SYSTEM. FINANCIAL INSTITUTIONS INVOLVED BELIEVE THAT THE
LOSSES WILL SOAR TO 100 MILLION DOLLARS AS A RESULT OF THIS SCAM.

THE SECRET SERVICE HAS A LONG HISTORY OF COMBATING DOMESTIC
CRIMINAL ACTIVITY BY INDIVIDUALS OF RUSSIAN DESCENT, GOING BACK
15 YEARS, AGENTS IN THE NEW YORK FIELD OFFICE WERE INVESTIGATING
SMALL RUSSIAN GROUPS COUNTERFEITING U.S. CURRENCY. THESE GROUPS
WERE CENTERED IN THE BRIGHTON BEACH AREA OF BROOKLYN, NY, BUT
WERE LINKED TO OTHER RUSSIANS IN AREAS SUCH AS PHILADELPHIA,

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PA. IN SOME OF THESE CASES, THE IMPORTATION AND DISTRIBUTION OF
ILLEGAL NARCOTICS WENT HAND IN HAND WITH THE PRODUCTION AND
DISTRIBUTION OF COUNTERFEIT CURRENCY.

ALTHOUGH WE CONTINUE TO OBSERVE RUSSIAN CRIMINAL GROUPS
INVOLVED WITH COUNTERFEIT CURREJiCY, WE HAVE ALSO ENCOUNTERED
RUSSIAN GROUPS PARTICIPATING IN CREDIT CARD FRAUD, BANK FRAUD,
TELECOMMUNICATION FRAUD, INSURANCE FRAUD, AND MONEY LAUNDERING.
WE HAVE OBSERVED THESE GROUPS ROUTINELY UTILIZING FALSE
IDENTIFICATION DOCUMENTS TO COI^IT THEIR FRAUDULENT ACTIVITIES AS
WELL AS UTILIZING THESE DOCUMENTS TO ASSUME NEW IDENTITIES AND
MOVE MORE FREELY BETWEEN THE U.S. AND OTHER COUNTRIES.

IN THE TELECOMMUNICATIONS FRAUD ARENA, THE SECRET SERVICE
HAS SEEN AN INCREASE OF INVOLVEMENT BY RUSSIAN ORGANIZED CRIME
MEMBERS. IN THE PAST TWO YEARS WE HAVE INVESTIGATED SEVERAL
TELECOMMUNICATIONS FRAUD CASES INVOLVING "CLONED" CELLULAR
TELEPHONE/CALL SELL OPERATIONS IN LAS VEGAS, NEW ORLEANS, AND
CHICAGO. UTILIZING CLONED TELEPHONES, THE CHARGES ARE
FRAUDULENTLY BILLED TO THE TRUE CELLULAR TELEPHONE NUMBER HOLDER.
CALLS ARE BEING PLACED FROM THE U.S. TO LOCATIONS IN ARMENIA,
RUSSIA, AND SOME OF THE NEWLY IflDEPENDENT STATES. LOSSES DUE TO
CLONED CELLULAR TELEPHONES ARE REPORTED AT $1 MILLION DOLLARS A
DAY COLLECTIVELY.

IF LEFT UNCHECKED, THE RUSSIAN ORGANIZED CRIME GROUPS HAVE
THE POTENTIAL TO INFLICT SIGNIFICANT FINANCIAL DAMAGE TO U.S.
INTERESTS. TESTIMONY BY COOPERATING DEFENDANTS INDICATES THAT THE

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RUSSIANS ARE MOVING AWAY FROM TRADITIONAL ACCESS DEVICE FRAUD AND
EXPANDING THEIR OPERATIONS IN THE AREA OF FINANCIAL INSTITUTION
FRAUD. CURRENTLY, WE HAVE ACTIVE INVESTIGATIONS OF RUSSIAN
ORGANIZED CRIME IN NEW YORK CITY, MIAMI, PHILADELPHIA,
PITTSBURGH, AND DENVER.

SECRET SERVICE RECOMMENDATIONS:

THE U.S. SECRET SERVICE, AS A MAJOR INVESTIGATIVE COMPONENT
OF THE DEPARTMENT OF THE TREASURY, BELIEVES THE SOLUTION TO THE
PROBLEM IS FOUND IN ONE OF THE CORE RESPONSIBILITIES OF THE
DEPARTMENT AND THE AGENCY: PROTECTION OF THE U.S. ECONOMIC AND
FINANCIAL SYSTEMS.

FURTHER, THE SECRET SERVICE BELIEVES THAT OUR LAW
ENFORCEMENT ROLE MUST, AND DOES, TRANSCEND NORMAL REACTIVE ARREST
AND PROSECUTIVE RESPONSES. THE PROACTIVE APPROACH MUST BE
UTILIZED TO ANALYZE DEFECTS AND PREVENT ATTACKS ON FINANCIAL
SYSTEMS. THIS PHILOSOPHY, INSTITUTED BY THE SECRET SERVICE IN
1990, HAS BEEN ADOPTED BY THE TREASURY DEPARTMENT AND IS
CURRENTLY BEING FURTHER DEVELOPED IN OTHER TREASURY OFFICES AND
BUREAUS. THE UNITED STATES SECRET SERVICE HAS TESTIFIED BEFORE A
NUMBER OF COMMITTEES DURING THE LAST TWO YEARS ON THE ISSUES OF
FINANCIAL AND ELECTRONIC CRIMES, COUNTERFEITING OF CHECKS AND
CURRENCY, FALSE IDENTIFICATION, DESKTOP PUBLISHING, AND ORGANIZED
CRIMINAL ACTIVITY IN THESE AREAS. OUR MESSAGE REMAINS THE SAME.
WE MUST COLLECTIVELY LOOK AT THE SYSTEMS THAT ARE BEING ATTACKED

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AND "FIX THE SYSTEMS" IN ORDER TO DIMINISH THE CRIMINAL ACTIVITY.
THE SECRET SERVICE EMPLOYS A PROCESS OF LINKING RISK ANALYSIS TO
OUR CRIMINAL INVESTIGATIONS TO IDENTIFY HOW THE FRAUDS ARE
COMMITTED AND, THEN THROUGH EITHER REGULATORY REVIEW OR INDUSTRY
PARTNERSHIPS, SET ABOUT TO CORRECT THE SYSTEM WEAKNESSES.
AS PREVIOUSLY STATED IT IS EVIDENT FROM OUR INVESTIGATIONS THAT
CRIMINAL GROUPS STUDY THE FINANCIAL SYSTEMS AND DEVELOP SCHEMES
BASED ON KNOWLEDGE OF THE SYSTE^!S AND WEAKNESS IN THESE SYSTEMS.
IN SHORT THE ORGANIZED GROUPS BECOME "EXPERTS" AND THEIR GOAL IS
RAPID WIDESPREAD FRAUD, THAT NETS PROFITS IN THE MILLIONS. THEY
ARE INDEED A FORMIDABLE ADVERSARY.

THE DEPARTMENT OF THE TREASURY PROMOTES A CONCEPT OF "KNOW
YOUR CUSTOMER" WHICH WHEN APPLIED CORRECTLY, IS A TREMENDOUS
DETERRENT TO FINANCIAL FRAUD SCHEMES. THE UNITED STATES SECRET
SERVICE THROUGH PREVIOUS TESTIMONY HAS STATED THAT BIOMETIC
IDENTIFICATION WOULD BE AN EVEN GREATER DETERRENT, AS MOST
FINANCIAL CRIMES AND LOSSES OCCUR BY CRIMINALS ASSUMING FALSE
IDENTITIES AND/OR PENETRATING ACCOUNTS WITH STOLEN ACCESS CODES.
I AM PLEASED TO REPORT THAT THE FINANCIAL COMMUNITY AND
FEDERAL, STATE AND LOCAL GOVERNMENTS ARE BEGINNING TO ADOPT
BIOMETIC IDENTIFICATION AS A PROACTIVE SOLUTION TO FINANCIAL
CRIMES AND LOSSES.

THE UNITED STATES SECRET SERVICE TODAY REMAINS ACTIVELY
ENGAGED AND COMMITTED TO NOT ONLY AGGRESSIVELY REACTING TO THE
PROBLEM BY INVESTIGATION AND ARREST OF VIOLATORS, BUT ALSO TO A

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FULL PARTNERSHIP WITH CONGRESS, INDUSTRY, OTHER FEDERAL, STATE
AND INTERNATIONAL AGENCIES TO HELP SOLVE THE PROBLEM. TO THAT
END, THE UNITED STATES SECRET SERVICE SUPPORTS AND APPRECIATES
THE EFFORTS OF THE CHAIRMAN IN CALLING THIS HEARING. WE LOOK
FORWARD TO WORKING WITH YOU, AND OTHER MEMBERS, AS LEGISLATIVE
INITIATIVES DESIGNED TO ADDRESS THE VOIDS ARE EXPLORED.
LEGISLATION INTENDED TO ASSIST LAW ENFORCEMENT IN COMBATING
FINANCIAL CRIMES AND COUNTERFEITING WILL CERTAINLY BE BENEFICIAL
IN THE OVERALL PARTNERSHIP EFFORT.

THIS CONCLUDES MY REMARKS, MR. CHAIRMAN. I WOULD BE HAPPY
TO ANSWER ANY OF YOUR QUESTIONS, OR THOSE OF THE COMMITTEE.

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OPENING STATEMENT

CHARLES L. OWENS

SECTION CHIEF, CRIMINAL INVESTIGATIVE DIVISION

FEDERAL BUREAU OF INVESTIGATION

BEFORE THE

COMMITTEE ON BANKING AND FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

WASHINGTON, D.C.

FEBRUARY 28, 1996

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HOUSE BANKING AND FINANCIAL SERVICES COMMITTEE
HEARING ON EMERGING INTERNATIONAL FINANCIAL CRIMES

Good Morning. I am pleased to appear today on behalf of the FBI and provide you with
some information related to emerging financial crimes matters.

The FBI White-Collar Crime Program is the largest and most diverse of all FBI Criminal
programs. During Fiscal Year (FY) 1995 (10/1/94-9/30/95), the White-Collar Crime Program
utilized approximately 25.59% of FBI agent work years and achieved 18.2 % of the FBI's total
convictions and pretrial diversions. Approximately 2,600 agents were dedicated to this program.
The White-Collar Crime Program was identified as the number one or number two priority in 53
of the 56 FBI field oflBces (95%).

In terms of workload, the White-Collar Crime Program encompasses approximately
22,645 pending matters. Of this total, Financial Institution Fraud constitutes 8,613 cases and
other national fi'audulent schemes total 4,090.

By any measure, this is a healthy, robust program which has experienced explosive growth
and globalization in recent years. The White-Collar Crime Program maintains an inventory of
some of the most complex cases in the FBI. Resources have increased more than 65% since
1985. White-collar crime is of significant interest to the public as well as the Congress. Our
investigative arsenal includes an abundance of investigative techniques, including undercover
operations and court-ordered electronic surveillance.

Prior to the 1980s, financial institution fi'aud investigations were primarily routine in
nature. Bank fi'auds generally involved only a few transactions, were perpetrated by a single
individual or small group, and generated losses that averaged less than $100,000 to the victim

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institution.

Following deregulation of the savings and loan industry in 1982, and the initiation of more
speculative, risk-enhanced ventures by those in charge of these institutions, a new wave of fraud
investigations emerged. During the late 1980s and early 1990s, FBI efforts were focused on
large-scale frauds perpetrated by institution insiders and those held in trust within the banking
industry. Some impressive results were achieved from these large-scale investigations, some of
which were task force-oriented investigations, and the banking industry as a whole has stabilized
and continues its efforts to minimize insider abuse. FBI bank failure investigations peaked in July
1992, with 758 active cases. As of the conclusion of Fiscal Year 1995, there were 395 pending
failure cases, mostly in the New England and southern California regions. With a reduction in the
number of manpower-intensive £ulure investigations, the FBI has been able to refocus its efforts
in other high priority Financial Institution Fraud and financial crimes matters.

Even though the number of &ilure investigations has declined, the number of major
financial institution fraud investigations, defined as those involving sustained losses over
$100,000, has continued to increase, from 3,026 during December 1991 to 4,018 as of September
1995. Outsider fraud now accounts for more than 60% of the criminal referrals provided to the
FBI by the financial institutions. Fraud as perpetrated by outsiders, especially organized
international groups, has risen dramatically since 1987.

During the past several years, a number of new and complex financial crimes have
developed, including negotiable instrument fraud, credit card fraud and money laundering. These
schemes often involve sophisticated counterfeiting techniques. Additionally, computer crime is a
growing problem which will continue to challenge law enforcement well into the next century.

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These crimes involve both organized ethnic groups operating in this country and outsiders
conducting illegal transactions between U.S. and foreign institutions.

In their 1994 Check Fraud Survey, the American Bankers Association (ABA) indicates
that the occurrences of check fraud within financial institutions have increased by 136% from
1991 to 1993. During this same period, dollar losses increased 44% from $568 million to $850
million. The country's major financial institutions believe that 50% of all check fraud, to which
they fell victim, can be attributed to professional and organized group efforts.

In addition to fraud committed against financial institutions, for the past two years the
Forensic and Investigative Services division of KPMG has compiled an annual fraud survey of the
2,000 largest U.S. corporations. These companies reported check fraud and credit card firaud as
their most problematic losses during 1994. The responding companies suffered an average annual
check fraud loss of $360,000, an increase of 38% from 1993. Alarmingly, 67% of corporate
executives believe these losses will continue to mount over the next several years. In sum, total
check fraud losses incurred by financial institutions, businesses and individuals during 1993
amounted to more than $5 billion, a $1 billion increase from 1992. More than 1.2 million
worthless checks are accepted for payment every day.

The technological improvements that have fueled the growth in check fraud schemes have
made it difiBcult for law enforcement to combat the problem. Forbes magazine reported on the
trend in 1989, stating "...the desktop computer did not create the crime of forgery. All it did was
make the tools user-fiiendly." With the prevalence of laser printers and advanced duplication
systems, the production of quality counterfeit checks has become commonplace.

Presently, a sizable portion of this annual check fraud activity is being perpetrated by

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organized ethnic and international groups located regionally throughout the country. There are -
80 billion checks written worldwide annually, 60 billion of which are written in the United States.
Numerous criminal ethnic groups which have immigrated to this country have taken the time to
study and analyze American banking, noting the deficiencies in the banking system relative to
negotiable instruments, and the inherent fi^udulent opportunities underlying this system, including
check theft, manipulation and counterfeiting.

Regardless of ethnic origin, groups involved in check fraud maintain certain universal
characteristics. Unlike other organized criminal organizations (La Cosa Nostra, Bloods, Crips,
etc.), these groups are usually loosely organized with members networking amongst several
organizations. Such groups usually maintain close ties with their overseas counterparts and often
conduct their fraudulent activities over several continents.

These organizations tend to be distrustful of anyone outside their own ethnic heritage,
making it difficult for law enforcement to proactively investigate the extent of their activities.
Check passers are frequently arrested throughout the country but possess little information
concerning upper echelon members.

The principal ethnic enterprises involved in illegal check fraud schemes include Nigerian,
Asian (particularly Vietnamese), Russian, Armenian and Mexican groups. The majority of the
Vietnamese, Armenian and Mexican organizations are based in California, especially in the
Orange County, San Francisco and Sacramento areas, but have networked their operations
throughout the country with additional concentrations in Chicago, Houston, Dallas and
Washington, D.C. The Nigerian and Russian groups, with bases in the north and eastern areas of
the country, are more nomadic in nature, tending to roam throughout the U.S., passing stolen or

184

counterfeit instruments, before moving on to new locations.

Nigerian groups often solicit legitimate identification and account information in
furtherance of their fi'aud schemes and have recently been noted to be working interactively with
Vietnamese organizations in the Chicago and Houston regions. In the northeast, Nigerian rings
have been opening investment accounts within various brokerage houses, depositing large sums of
money with stolen and counterfeit corporate checks.

Most west coast Asian gangs began to organize their bank fraud activities during the
1980s and have continued to expand and develop these sometimes sophisticated operations.
Many such groups originated in Taiwan, Hong Kong and Vietnam and include the Viet Ching, the
Big Circle Boys, the V-Boyz, Wo Hop To, Wah Ching and Red Door. Additionally, these groups
are often involved in the counterfeiting of credit cards, other marketable items, and computer
software. Microsoft Corporation alone, estimates their 1994 losses from counterfeit software at
SI 79 million. Current investigations indicate that some Asian groups have been dealing with
Russian counterparts.

Although it is impossible to summarize all of the check fraud schemes currently operating,
the following examples represent common frauds being tracked by bank security officials and law
enforcement authorities throughout the nation:

1) Large Scale Counterfeiting - The most notorious groups engaged in large scale
counterfeiting operations, and being investigated by the FBI, are the Vietnamese triads originating
out of Orange County, California. Members are routinely placed within local financial institutions
in order to collect master original bank checks, money orders and corporate/payroll checks for
counterfeiting purposes. Once the counterfeiting process is completed, the instruments are

185

subsequently negotiated in a variety of ways. A portion of the counterfeits is directly negotiated
through financial institutions, by check passers. The fraudulent checks are deposited, often into
new accounts, and the funds are withdrawn before the clearing process has concluded and the
fraud is discovered.

2) Identity Assumption - This scheme has been seen in various metropolitan areas and
often involves Nigerian and Vietnamese criminal organizations. Group members oflen obtain
employment or develop sources in local banks and credit agencies in order to acquire otherwise
confidential information on bona fide bank customers. The groups then create counterfeit
identification, to include drivers licenses, social security cards and credit cards, to effect an
assumption of the innocent person's identity.

This identity is used to open new bank accounts, used for the deposit and subsequent
withdrawal of funds from fi^udulent checking activity, and for securing personal loans and lines of
credit. Once the identity has been assumed and bank accounts have been established, the financial
institutions are open to be defrauded in a variety of ways. Prior to depositing fraudulent checks
and withdrawing the proceeds, the "customer" is likely to obtain a Visa and/or MasterCard
account with a substantial credit line. Fimds are withdrawn against the credit line and distributed
within the criminal organization, along with any bogus loan proceeds that have been procured.
After withdrawing monies pursuant to the deposit of fi^udulent checks, the "customer" leaves
town with the bank sustaining a substantial loss. The innocent person whose identity was
assumed also becomes a victim, finding that their credit history has been ruined, inhibiting their
future financial activities.

3) Payroll Check Fraud - A variation of the above scheme involves placing group

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members within payroll check processing companies engaged to compile and distribute payroll
checks on behalf of their corporate clients. These employees will print duplicate payroll checks
for various client employees, which are subsequently stolen from the premises and duplicated for
negotiation. Concurrently, the group now has full background identifying data for actual client
employees which can be used in future schemes.

The following international fraud scheme was recently investigated by the FBI:

During early 1995, the Los Angeles Police Department notified the FBI concerning
information that subject Cuong Thoai Diep was attempting to recruit a U.S. banker to steal more
than $10,000,000 in bank and cashier's checks as part of a loan fraud scheme based in Hong Kong
and Beijing, China. An FBI undercover Agent posed as a local banker who agreed to provide
Diep and his associate Tony WingYu with $13,500,000 in counterfeit and stolen cashier's checks.
These checks were to then be used as collateral in fraudulently obtaining a series of Chinese loans
totaling more than $50,000,000. The scheme also involved the corruption of a People's Republic
of China bank official and several Asian organized crime subjects.

During February 1995, subjects Diep and Yu, who had been successfully lured from Hong
Kong, were arrested on various bank fraud charges; Diep was eventually sentenced to 15 months
in prison, while Yu was sentenced to 24 months.

Of the approximate 193 million people in the United States over seventeen years of age,
124 million owned at least one credit card in 1994. Worldwide bank card (Visa and MasterCard)
fraud losses have increased from $1 10 million in 1980 to an estimated $1.63 billion in 1995. The
United States has suffered the worst of these losses at approximately $875 million for 1995, not
surprising since 71% of all worldwide revolving credit cards in circulation were issued in this

187

country.

Law enforcement authorities are continually confronted with new and complex schemes
involving credit card frauds committed against financial institutions and bank card companies.
Perpetrators run the gamut from individuals with easy access to credit card information, such as
credit agency oflBcials, airline baggage handlers and Postal Service employees, to organized
groups involved in large-scale card theft, manipulation and counterfeiting activities.

Visa and MasterCard account for approximately 65% of all outstanding revolving credit,
and most substantive fraud cases involve schemes centered on one or both of these bank cards.
While losses to Visa, MasterCard and the financial institutions issuing these cards continue to
mount, several basic schemes have been identified as most prevalent throughout the nation.
Additionally, law enforcement authorities are continually encountering various ethnic groups and
organizations involved in multi-level bank card fitiud operations. It should be noted that nearly
one fifth of all U.S. credit card losses occur in California, close to the combined total for the other
five identified problem areas worldwide: Florida, Texas, New York, Asia and Great Britain.

Following are three of the most common credit card schemes currently operating:

1) Mail/Credit Bureau Theft - One of the simplest ways to obtain account information or
actual bank cards is through Postal theft. Numerous Nigerian fraud rings operate sophisticated
theft operations throughout the eastern and southern regions of the U.S. Having obtained a
legitimate bank card or account information, the group will then create a portfolio of fictitious
identification, including drivers licenses, social security cards and other materials, to support the
purchasing power behind those cards. At the direction of group leaders, "runners" will be
employed to purchase merchandise from a variety of sources, until the cards are reported as stolen

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or confiscated. These organizations also take advantage of contacts within the various credit

bureaus to obtain legitimate bank card account information for counterfeiting or telephone order
purchasing. The groups commonly mail stolen cards and infonnation, via an overnight courier, to
other factions located throughout the country.

2) Advance Payment Schemes - Federal consumer credit regulations require credit card
issuers to credit a customer's account as soon as payment is received; i.e., before the payment
instrument has cleared the bank. This scheme is simple. Using a counterfeit or stolen credit card,
the individual or group will either make an advance payment on the card or overpay an existing
balance using a bogus check. Since the account is credited upon receipt of payment, cash
advances can immediately be drawn against the bank card before the payment check has cleared.
Through hundreds of like payments, an organization can realize profits in excess of $1 million
within a relatively short period of time.

3) Counterfeiting - The fastest growing type of bank card fi'aud, in both fi-equency and
severity, involves the illegal counterfeiting of Visa and MasterCard. New technology has aMed
criminals in producing exact replicas of existing cards and in creating fictitious cards fi'om scratch.
Illegal counterfeiting is primarily responsible for the overall surge in credit card fi'aud, particularly
in California, a hotbed for Asian gang counterfeiting activity, where occurrences of credit card
fi-aud increased by 370% from 1991 to 1993, from $60 million to $282 million, according to an
Intelligence Operations Bulletin prepared by the Office of the Attorney General, California
Department of Justice, Vol. 47, dated December 1994.

The industry foresees a time when members will be able to use a single card to
accommodate a variety of transactions, including international automatic teller machine (ATM)

189

withdrawals, credit purchases, direct bill payments and purchases against predetermined stored
value levels.

Several companies are currently working with Visa and MasterCard on these services, and
prototypes of stored value and debit/credit combination cards are being test-marketed and issued
throughout the world. The goal is to create a single card through which customers can administer
all their financial needs, fi'om paying bills via electronic transfer of funds to buying and trading
securities over the New York Stock Exchange.

In addition to these services, financial institutions are beginning to implement Automatic
Loan Machines (ALMs) which can be accessed by customers or potential customers using their
bank cards. These machines offer individuals the opportunity to obtain various types of financial
loans without having to personally meet with a bank representative. Although the system is still in
its infancy, bank officials envision ALMs becoming as commonplace as current ATMs in this
country.

Several cases have been investigated by various FBI field offices in which counterfeit
negotiable instruments such as prime bank notes, certified money orders and bonds purportedly
issued by foreign governments have been utilized. Often, these counterfeit instruments are
presented for sale by con artists who state that the instruments can be used to collateralize loans
or perpetrate other fi'auds. Although the dollar denominations of these instruments can be large,
they are typically sold for a percentage of their stated value. The attempted use of counterfeit
negotiable instruments in various fi'aud schemes has risen dramatically. However, many of these
attempts result in actual losses that do not meet federal prosecutive guidelines.

White-collar crimes such as those mentioned previously, produce billions of illicit dollars

190

annually. To enjoy the fruits of these criminal activities without raising suspicions, the ill-gotten
gains must be laundered to make it appear that they were obtained legitimately. The general
nature of white-collar crime is the production and concealment of assets for financial gain;
accordingly, money laundering is an inherent part of white-collar crime.

The money laundering statutes, Title 18, USC, Sections 1956 and 1957, were designed to
address monetary transfers and monetary transactions undertaken using proceeds and/or property
acquired through various unlawful activities. The money laundering statutes have numerous
"Specified Unlawfial Activities" or predicate offenses which serve as a jurisdictional basis for
pursuing money laundering investigations. The vast majority of these SUAs fall within the
investigative purview of the FBI.

The FBI investigates money laundering activities in connection with more than 50% of its
substantive oflFense investigations. For fiscal year 1995, investigations leading to the fiUng of
money laundering charges were as follows: White-collar crime cases (57%), drugs/organized
crime cases (33%) and violent crimes cases (10%). The money laundering statutes have been
powerful weapons in addressing white-collar crime; paxticulariy, as forfeiture provisions have
allowed for the dismantling of criminal enterprises.

The FBI has identified money laundering havens around the worid and developed
initiatives to address these criminal activities. For example, the FBI has teamed with United
Kingdom authorities and formed the White-Collar Crime Investigative Team. WCCIT
investigates fraud and non-narcotics money laundering activities that impact upon the U.S., the
United Kingdom and its Caribbean dependent territories. Highly experienced FBI Agents and
British police officers who have investigative jurisdiction on the British dependent territories

191

jointly investigate complex and multinational fraud and white collar crime money laundering
cases. This structure provides the necessary investigative prowess and access to pertinent
evidence. The FBI has been approached by law enforcement representatives from other countries
to discuss expanding this team to other parts of the Caribbean.

The FBI investigates computer crimes under the Computer Fraud and Abuse Act of 1986
(Section 1030). The focus of the FBI's Computer Crimes Initiative is on intrusions into major
computer networks, with emphasis on intrusions into the networks constituting the National
Information Infrastructure.

In February 1992, the FBI established a National Computer Crimes Squad to address
substantive investigations of significant computer crimes on a nationwide basis, particularly those
involving intrusions into major computer networks, such as the Public Switch Network (PSN).
The PSN is an integrated computer-based system managed by the long-distance carriers and the
regional Bell operating companies. Currently, within the United States, almost all
communications and transactions generated by the public and private sector, including the U.S.
military, are, or will become, dependent upon the telecommunications services provided by the
PSN. Other networks, such as the Internet, also depend in part or in whole upon the PSN.

The government and our society as a whole are heavily reliant on computers. Computer
systems store and process our most sensitive national and industrial secrets. The threat to this
information is very real. Designing appropriate computer security is a vital component to
preventing computer crime. This includes not only security programs connected with systems, but
physical security, personnel security, operational security, and communication security. The most
visible threat is the hacker, responsible for many of the reported intrusions into government and

192

private networks. Considering most intrusions go undetected and/or unreported, the hacker's
true impact is undeterminable particularly when their specific objectives are unknown.

The Computer Emergency Response Team, known as CERT, based at the Carnegie-
Mellon University, in Pittsburgh, Pennsylvania, reports that the number of reported intrusions into
U.S. -based computer systems rose from 773 in 1992 to more than 2,300 by 1994, a 197 percent
increase in two years. Additionally, CERT reported the number of sites attacked rose more than
89 percent during the same period. Although the statistics are not comprehensive, they
nevertheless are indicative of a significant rise in the crime problem. The estimated cost of
intrusions is astronomical considering the hackers ability to steal, modify, or destroy sensitive
data. A recent survey, conducted by the Computer Security Institute of San Francisco, California
found that break-ins, unauthorized access, and other security breaches cost them a staggering $63
million over the past several years. However, only 12 percent of respondents surveyed placed a
dollar value on their losses. Thus, the actual dollar loss to the nation is significantly understated
with estimates ranging as high as $5 billion annually.

In addition to attacking this crime problem, our investigative eflForts have served as a
deterrent faaor. An early example of this is a joint investigation in which the FBI participated,
involving a group of computer hackers known as the "Masters of Disaster." Following the
announced indictments and arrests of seven individuals in the group, security officials fi'om
various computer networks subsequently advised the FBI of a significant temporary reduction in
intrusion attempts.

The Washington Metropolitan Field Office's National Computer Crime squad, created in
1992 to address national and international computer crimes, has been augmented by creating two

193

additional regional computer crime squads with similar responsibilities in the FBI's New York and
San Francisco Divisions. These squads will work closely with the "High Technology Crime"
Squad previously established in San Francisco to respond to related high technology crime
matters, i.e., theft of computer chips, economic espionage, computer intrusions and the illegal
copying of computer software, in the Silicon Valley.

An emerging trend in the banking arena is that of "Cyberbanking". Recent technological
advances in telecommunications and the computer have brought about a circumstance where
banks can ofifer many of the same services on a much wider scale without having to invest vast
sums into the brick and mortar of additional banks and branches. The growing user-friendliness
of the Internet now allows inexpensive, instant telecommunications around the globe. With this
ability also comes the potential for new avenues of fraud to be perpetrated by computer savvy
criminals. There are currently more than 35 million Internet users worldwide. Since 1990,
Internet use has grown more than tenfold. One business group estimates that more than 21,000
businesses are now connected to the Internet, compared to only 1,000 in 1990. Criminal Internet
users can remain anonymous and evade detection by using aliases. They can also obscure their
trail by routing their activities through other computers. Criminals can use encryption to protect
their communications from anyone, law enforcement included.

The impact of this emerging technology on financial institutional fraud is evidenced by an
FBI investigation regarding attempts to illegally wire transfer millions of dollars from Citibank.
Between June and October 1994, 40 wire transfers were attempted from Citibank Cash
Management System (CCMS). Access was gained by compromising the password and user
identification code system through the use of a computer and phone line located in St. Petersburg,

194

Russia. Citibank was successflil in blocking most of the transfers, or recovering the funds from .
recipient banks, before funds were withdrawn. As a result, losses were limited to approximately
$400,000. With the assistance of the Russian MVD, computer software was seized in St.
Petersburg and was analyzed in Russia by representatives of the FBI's Computer Analysis and
Response Team, established to conduct in-depth forensic analysis of computer evidence. The
investigation has resulted to date in four subjects pleading guilty.

As indicated above, the FBI is actively addressing multiple types of crimes which
significantly impact financial institutions. However, the FBI does not believe that the activities of
organized criminal groups perpetrating external frauds threaten the integrity of the banking
system.

While these crime groups are a significant problem, the FBI believes that the greatest
threat to the stability of the financial industry continues to be conspiracies perpetrated by industry
professionals. Bank fraud as perpetrated by banking insiders greatly overshadows, in terms of
dollar losses and public confidence, those external frauds perpetrated by organized criminal
groups.

One has only to look at examples of the losses incurred in two recent incidents of insider
fraud that resulted in substantial bank losses and failures. Japan's Daiwa Bank lost approximately
$ 1 1 billion in bond trading and has been ordered to cease operations in the U.S. The other
incident involves the British trader Nicolas W. Leeson who was charged with fraud and forgery
related to $1.4 billion in losses to the Barings P.L.C. merchant bank. Leeson, a derivatives trader,
handled contracts worth millions of dollars on the Singapore International Monetary Exchange.
These losses resulted in the collapse of the bank.

195

To address the above crime problems, the FBI has utilized a vast array of federal criminal

statutes (See attachment #1). These statutes have provided us with the tools to adequately
address the crime problems and have significantly contributed to our success.

196

ATTACHMENT #1
FINANCIAL INSTITUTION FRAUD VIOLATIONS

VIOLATION

Bribery

Conspiracy

Counterfeit State and
Corporate Securities

Embezzlement, Theft or
Misapplication

False Entries, Reports
and Transactions

False Statements - Loan
and Credit Applications

FEDERAL LAW
T18 use 215
T18 use 371
T18 use 513

T18 use 656,
657

T18 use 1005,
1006, 1007

T18 use 1011,
1013, 1014

Fraud and Related Activity T18 USC 1029

in connection with access

devices

Fraud and Related Activity T18 USC 1030
in connection with computers

Mail Fraud
Wire Fraud
Bank Fraud
Money Laundering

T18 USC 1341

T18 USC 1343

T18 USC 1344

T18 use 1956,
1957

MAXIMUM PENALTY
30 Yrs/$1 Million
5 Yrs/$10,000
10 Yrs/$250,000

30 Yrs/$1 Million

20 Yrs/$100,000

10 Yrs/Fine

5 Yrs/$ 1,000

5Yrs/$l,000

30 Yrs/$1 Million

20 Yrs/$500,000
Plus Forfeiture

197

Racketeer Influenced
Corrupt Organizations
(RICO)

Bank Larceny

Interstate Transpor-
tation of Stolen Property

T18 use 1961

T18 use 2113
T18 use 2314

20 Yrs to Life
Plus Forfeiture

20 Yrs/$5,000
10 Yrs/$ 10,000

198

District Attorney
QUEENS CX)UNTY

I2S4I Ql;EX^S BOtLEVARD
KEW GARDENS. NEW VORK I MIS-ISM

iTItl 2

Richard A. Brown

District Attorney

TestJJBony of

RICHARD A. BROWN
DISTRICT ATTORNEY, QUEENS COUNTY

before the

UNITED STATES HOUSE OF REPRESENTATIVES
COMMITTEE (Xi BANKING AND FINANCIAI. SERVICES

10:00 A.M. Wednesday
February 28, 1996

2129 Raybum House Office Building
Washington, D. C. 20515-6050

199

TESTIMONY OF DISTRICT ATTORNEY RICHARD A. BROffN

BEFORE THE UNITED STATES HODSE OF REPRESENTATIVES

COMMITTEE ON BANKING AND FINANCIAL SERVICES

FEBRUARY 28, 1996

Losses resulting £roD credit card fraud worldwide are
estimated to amount to almost three billion dollars each year —
half of that amount in the United States. The apparent ease with
which credit card fraud rings take over the identity of legitimate
cardholders and rip off banks and credit card companies and create
financial havoc for legitimate cardholders is alarming. The losses
are, of course, paid for in the last analysis by the consuming
public. And, it taJces months — often years — for the victims of
credit card fraud to undo the damage done to their reputations and
to restore their credit status.

Indeed, the problem has become so widespread that it has begun
to draw the attention of the national media. Over the past few
weeks, it has been the subject of a number of newspaper and
magazine articles, including one two weeks ago in Time Magazine —
and this past Sunday evening it was the focus of a segment of CBS
Television's "60 Minutes."

Three weeks ago, after a five month investigation, our office
filed a 200 count indictment in New York's Supreme Court under our
State ' s Organized Crime Control Act — our State ' s equivalent of
the Federal RICO statute — charging eight Nigerian nationals with
operating a multi-million dollar counterfeit and stolen credit card
ring in the New York metropolitan area — a ring that specialized
in the theft of the credit identities of thousands of people across
the United States and that had contacts throughout the world.

The indictment alleges the existence of a very sophisticated,
highly structured ring of credit card and credit identity thieves
whose members were masters at accessing credit and financial
information — and at evading detection by law enforcement. Just
as they assumed the credit identities of their victims, those
involved took new and different identities of their own to avoid
apprehension .

The ring — and we believe that there are many more like them
operating across the country — is alleged to have operated on
three levels or tiers. At the head of the organization was
Olushina Adekanbi, known as "Shina." He and several other upper
level managers are alleged to have directed the entire operation
and to have obtained and possessed the equipment and technical
skills required to produce counterfeit credit cards and to access
confidential! credit and financial information.

The second tier consisted of middle level managers who were
responsible for recruiting and paying street level members of the
ring or soldiers who used the stolen and counterfeit cards to
obtain cash advances and purchase goods — usually to be shipped to

200

Nigeria. The managers also are alleged to have located customers
wishing to purchase stolen or counterfeit credit cairds and having
steered them to the principals.

The soldiers allegedly stole credit card receipts and invoices
from businesses and retail establishaents in which they worked or
to which they had access and then passed the stolen documents up
the chain of command to the top. They also allegedly bought and
sold stolen credit cards on behalf of the ring and acted as
"shoppers" who actu£d.ly purchased goods and services with the
stolen and counterfeit cars.

While most of the alleged members of the criminal enterprise
are alleged to have resided in and operated out of the New York
metropolitan area, it is alleged that they had well-established
contacts in Texas, Illinois, California, Connecticut, Rhode Island,
Massachusetts and New Jersey as well as in London, Tokyo, Singapore
£uid Amsterdam. The web of contacts enabled the enterprise to
operate in one or many locations and to execute fraudulent
transactions in many states and abroad.

The workings of the ring are best explained by describing how
their members obtained access to credit and personal information
about their victims and thereafter used that information to their
advantage. According to the indictment, in some instances the
soldiers took advantage of their positions as employees in retail
establishments in cities across the country and stole credit card
receipts and invoices containing the names, addresses and credit
card numbers of their custoners. The search warrant that was
executed at the apartment out of irtiich the ring in our case
operated resulted in the seizure of invoices stolen, for example,
from a Watertown, Massachusetts appliance store, a storage facility
of Budget Car and Truck Rental in Warwick, Rhode Island and from a
Shell gasoline station in Evanston, Illinois.

The credit csurd receipts and invoices stolen by the ring's
soldiers would be delivered to the middle managers who would use
the information thereon — name, address, credit card number,
telephone number — to obtain additional data about the cardholder
and to gain access to his or her credit identity. Using this
information, Adekanbi and his confederates are alleged to have
meuiufactured thousands of counterfeit credit cards using the
victim's credit card or access number and a fictitious name that
could be used by low or middle level maabers, ofttimes with a fake
photo ID card or driver's license, to obtain money or purchase
goods and services.

But they didn't stop there. The organization's members would,
it is alleged, look to obtain even more information about their
victim. Sometimes, for exaiiq>le, they would contact credit
reporting services — like Equifax or TRN — or a mortgage company

201

or a car dealership to obtain their victin's credit history and
credit limits, to detemine the existence of other credit card
accounts and learn additional personal data about their victim.
This information would then be used to create additional credit
cards, fake drivers' licenses and other forms of identification
that would be used in turn to obtain more cash advances and more
goods and services — even convenience checks to be used to
withdraw funds from their victim's account or to increase the
credit limit thereon by writing a check on an account already
cleaned out.

Another tactic used by the ring was to divert the cardholder's
mail to mail drops in other cities controlled by them. This would
be done simply by filling out and submitting a forged United States
Postal Service change of address form at a local post office based
on personal information about the victim taken from the stolen
cards and invoices. Ho identification is apparently required by
the postal authorities. Indeed, change of address forms can simply
be mailed to the local post office and their mail will be
intercepted and diverted to another address or to a post office box
or mail drop rented by the thieves.

In other cases, ring members are alleged to have stolen valid
Visa and MasterCard credit cards from the mail or in "batch thefts"
frcMD the airports and then used or sold them. Typically, banks and
credit card companies mail out large quantities of credit cards in
single shi^xnents destined for cardholders living in particular
areas of the country. Such batches woiild be stolen at airports or
other points of shijment. For example, there were seized in our
case many Bank One and ATST Universal cards stolen from the
Houston, Texas airport in 1995. Once in possession of a victim's
mail or stolen card, ring members can activate cards or request new
PIN numbers on existing cards and obtain access to their victim's
funds to the extent of their credit limit.

Another example of that which occurs is the theft of credit
information directly from financial institutions. Thus, in our
case investigators seized computer sheets stolen last year from
Chemical Bank in Hew York City on which were provided the name,
address, social security number, personal data, credit limits,
tracking information and PIN numbers and other information for
Chemical Bank Visa and MasterCard cardholders.

Stolen cards are generally sold to soldiers or outside
customers for ten percent of the access number's credit limit (e.g.
$500 would be the fee for a stolen credit card with a credit limit
of $5,000.) Counterfeit cards are generad.ly sold for a flat fee of
$650 and, becaiise the resale value of a stolen card depends on the
victim's credit limit, ring members are eager to ensure that their
victim maintains a good credit rating while they are being
victimized. Accordingly, they use counterfeit cards to pay off

202

account balances on their victui's legitiaate cards so that they
can be used to the full extent of their victim's credit limit.

The business of these criminal organizations is conducted on
cellular telephones. To further the goals of the enterprise, the
ring members possess and use cloned cellular telephones and
fraudulently apply for cellular telephone service using the names
and identities of their victims. By using cloned phones and
fraudulent applications, many thoiisandw of dollars of cellular
phone calls can be placed and received without the ring members
paying any monies to the cellulaur phone carrier and, by so doing,
detection by law enforc^nent is made much more difficult.

In our case, the ring seems to have operated for some time
without being disturbed. It had great success and its members were
extremely knowledgeable and industrious. One worker had 32
successful ATM transactions in Connecticut during a ten-day period,
each with an average payoff of $1 , 000 . So successf ill were Adekzuibi
and his organization that Adekanbi was known in Nigeria as the
"King of New York." Part of the reason for his success was that he
was very careful to avoid detection, having those who worked for
him switch identities and by regulating and controlling the number
of cards entering the stream of commerce at any given time as well
as by having his employees operate in a number of different cities
rather than in a single location.

But in September of last year, something happened that changed
the ring's luck. One of its soldiers, a woman known as Florence
Jameson, attempted to use a counterfeit credit card to purchase a
$2,000 fax machine, a $1,200 computer and other items at a business
supply store in Bay Ridge, Brooklyn. A store employee realized
that the card was counterfeit and notified authorities. The woman
was arrested and debriefed and the information obtained ultimately
led to Mr . Adekeuibi ' s apartment in an apartment house on a quiet
residential street in Jamaica, Queens. Se2urch wairrants were
obtained and executed at that apartment and the results were
amazing.

We discovered a stolen and counterfeit credit card factory
that could manufacture unlimited quantities of counterfeit credit
cards. A team of investigators from my office, the United States
Secret Service, United States Postal Inspection Service emd the New
York City Police Department seized hundreds of counterfeit and
stolen Visa, NasterCatrd, American Express and DiscoverCard credit
cards. There were stacks of blank plastic cards and other cards in
various stages of being counterfeited. The investigators also
discovered hundreds of United States Postal Service change of
address forms, holographs, magnetic tape and other equipnent used
to manufacture counterfeit credit cards including an encoding
machine used to insert data on a card's magnetic strip, an
embossing machine that presses out the raised lettering on a card

203

and a tipping machine for applying gold-colored ink to the raised
letters. Also seized were a large quantity of access nunbers for
credit cards and bank accounts — numbers that could alone access
some $8 million in credit. Also seized %fere computers, cellular
phones and beepers as well as extensive computerized information
stored in the ring's computer data base and other records and
information relating to its illegal activities.

Months of hard tfork followed. A team of experts — financial
fraud investigators, detectives and assistant district attorneys
began the painstaking work of sorting through every piece of paper
seized — every invoice, every credit statement, every change of
address form and all of the books and records that the organization
kept — in order to determine the full nature and scope of the
criminal enterprise and put together a case for criminal
prosecution against the principals. As the investigative team
found documents relating to out of state transactions, local law
enforcement agencies in each jurisdiction were contacted and their
cooperation and assistance were sought. They, in turn, were able
to provide invaluable assistance. Because they were involved in
the local investigation and prosecution of even small transactions
in their jurisdiction, they were often aible to provide key
witnesses and missing pieces that helped explain the larger
picture. Every lead was followed up until we felt that we had
legally sufficient evidence to charge Adekanbi and his confederates
under our State Organized Crime Control Act statute.

The investigation leading to last nionth's indictment could not
have been successfully conducted without the cooperation and
support received from the Special Investigations Division of the
New York City Police Department, the United States Postal
Inspection Service, the United States Secret Service and the credit
card and banking industries as well as from ATT Wireless /Cellular
One and Bell Atlantic/NYNEX Mobile. Because of the interstate and
international reach of the ring, we also sought and received
assistance from the Waterford, Connecticut, Fort Lee, New Jersey
and Evanston, Illinois Police Depatrtments, the Metropolitan Police
Service (Scotland Yard), the Bronx, Nassau and Kings County, New
York District Attorney's Offices and the Connecticut and Maryland
State Attorney's Offices.

And none of that which we accooiplished could have occurred
without the leadership, professionalism and dedication of my office
team lead by Senior Executive Assistant District Attorney for
Investigations, John M. Ryan, and the Chief and Deputy Chief,
respectively, of our Ecooomic Crimes Bureau, Michael J. Mansfield
and Edward J. McGovem. Assistant District Attorneys Diana M.
Peress and Jeffrey P. Horblitt did yeoman work on the case as did
so many others including Detectives George Byrd, Frank O'Rourke and
Russell Gaska of our Detective Bureau.

204

It is my hope that the indictment that has been £iled by us in
New York, the national publicity that has been received with
respect to the issue of credit card fraud and the holding of this
heauring by your distinguished committee will atlert consumers to the
existence of these criminal rings and encourage consumers — and
banks and credit card companies and merchants as well — to taJce
greater precautions in the issuance, use and acceptance of credit
csirds .

While some steps — such as the discontinuance of the use of
carbons of caurd imprints, known as "black gold" among thieves
because of their value — have been taken to cut down on credit
card fraud, there is much more that must be done.

Additional educational initiatives should be required to help
legitimate merchants and their employees to spot counterfeit cards.
Consumers must be made aware of the possibility of mail diversion
and urged to contact their credit card companies and local post
offices if they fail to receive their bills or other expected
materials on time.

The United States PostaJ. Service must begin to build into
their system security safeguards before they allow mail to be
diverted. The Postal Service makes it is much too easy to divert
one ' s mail today . Change of address cards can be sent in by mail
with no questions asked. NO personal appearance nor photo ID is
required. The post office will simply forward your mail —
including bank statements, investment account repoz-ts, credit card
bills — to whatever location or mail drop thieves ask that it be
sent. And no questions are asked.

And how does the Postal Service respond? Leslie Stahl said
last Sunday night on "60 Minutes" that they initially said "the
problem was insignificant" but that later they called back and said
"No, you're right, we do have a problem. We have a huge hole in
our system." Somehow that hole must be closed.

Two suggestions I would make toward closing that hole. I'm
sure there are more. Firstly, I would require a personal
appearance with proper photo ID before one's mail is diverted. And
secondly, I would require the sending of a confirmation notice by
the Postal Service to the consumer before divez~ting any mail from
his residence.

Another step would be to encourage law enforcement and
security personnel to debrief "shoppers" *dio use stolen and
counterfeit cards in order to determine if they are part of a
larger ring. Prosecutors can be more aggressive by not just going
after the individual who uses the phony card but rather — as was
done in our case — by using our State's Organized Crime Control
Act with its enhanced penalties of up to 25 years in jail to get at

205

the entire ring and all of its nembers.

In oiir case, Mr. Adekanbi's histoid also suggests that we must
strengthen our efforts to deter deported criminals from re-entering
the country. Mr. Adekanbi was deported in 1992 after a previous
criminal conviction for credit card fraud, but was able to return
to this country about a year later under an assumed identity. And
his trip was probably paid for on a stolen or counterfeit card —
or perhaps with frequent flyer mileage accumulated on a legitimate
credit card.

And to facilitate the investigation and prosecution of credit
card fraud cases, banks should be required to retain their bank
surveillance photos for a longer period of time than they now do.
Because there is at least a 30 day lag before a consumer discovers
that his or her credit identity has been stolen, bank surveillemce
photos should be retained at least that long and probably longer.
And banks should provide the same documentation to investigators in
credit ccird cases as they do in bank robbery cases. That does not
always happen now even though banks lose much more money through
credit card fraud than they do as a result of bank robberies.

But most importantly, I would argue that we've got to change
the mindset of the credit card and banking industries — and that
of the consumer as well. Security and fraud enforcement are tzdcing
a back seat to those who market and use credit cards. The view of
the industry marketing people seems to be that if we tighten
security too much and make it more difficult for the consumer to
use his or her credit card, the card will be used less — that
losses from credit fraud can easily be absorbed as long as credit
cards are easy to acquire and to use and gross sales continue to
grow. Their theory is to maJce it as easy as possible for the
consumer to acquire and use his or her caird — send him pre-approved
credit in the mail, give him a gold card and don't allow cashiers
to question his identity, let him get a new card over the telephone
or replace an allegedly lost PIN number simply by calling. If one
transaction out of ten is fraudulent, so what. The other nine will
absorb the loss.

I would argue, however, that to allow credit card fraud to
continue to flourish as it now does — is pennywise and pound
foolish. Credit card fraud rings such as those involved in our
case are becoming much more sophisticated. Losses will continue to
grow. These rings will not limit themselves merely to credit card
fraud but will expand into all other types of financial abuses.
Consumers will become less and less willing to pay the high
interest rates that are required to cover the losses generated by
these credit card and financial fraud enterprises.

Last Sunday night's "60 Minutes" program focused on a staff
doctor at the Mayo Clinic in Rochester, Minnesota. Not only was

206

she the victim of credit card fraud, but the thieves found a way to
tap into her retirement fund — they asked for a redistribution
form and then sought a lump sum distribution with penalty and sent
it in. They attempted to get a $15,000 check out of the doctor's
investment account and even accessed her daughter's college fund.

All sorts of other types of financial fraud
money laundering, for example, and other econcoic crimes — crimes
which facilitate criminal activity and have a devastating impact on
our citizens are growing by leaps and bounds. As our indictment in
New York demonstrates, we — and local and state prosecutors like
us — stand ready to aggressively investigate and prosecute these
crimes. However, to do so effectively, we need the continuing
cooperation of our colleagues in federal law enforcement and access
to intelligence gathering resources like, for example, FINCEH which
offers invalu£d>le assistance in the area of money laundering. And
we need to see implemented the kinds of suggestions that I have
made here today.

By so doing and by pooling the vast resources of law
enforcement expertise available at the local, state and federal
level — including that available from the security people in the
credit card, banking and financial industries — I am confident
that we can do a great deal to effectively respond to the growing
problem of organized criminal enterprises Involved in multi-
jurisdictional and international financial crimes.

207

department of f us^tite

STATEMENT OF

MARK M RICHARD

DEPUTY ASSISTANT ATTORNEY GENERAL

CRIMINAL DIVISION

BEFORE THE

COMMITTEE ON BANKING AND FINANCIAL SERVICES
UNITED STATES HOUSE OF REPRESENTATIVES

CONCERNING

THE THREAT ORGANIZED CRIMINAL GROUPS POSE TO THE
INTERNATIONAL FINANCIAL SYSTEM

ON
FEBRUARY 28, 1996

208

Mr. Chairman and Members of the Committee, thank you for the
opportunity to appear with fellow law enforcement colleagues before
you today to discuss the threat organized criminal groups pose to
the international financial system and some of the steps the United
States must take to combat international organized crime.
1 . International crime poses an increasing threat :

The United States must do all it can to counter foreign
countries' becoming havens for organized crime and criminals that
can, in the modern era, so easily victimize our citizens. We are
concerned about the impact of international organized crime on
United States financial and commercial institutions, especially
since the United States goes to great lengths to encourage free
trade throughout the world. In fact, in response to the growing
threat to the United States posed by international crime, in his
October address to the United Nations General Assembly, the
President announced a number of steps we will be pursuing to combat
international crime: maintaining strong sanctions against states
that sponsor terrorism; pressing nations which are most egregious

209

in facilitating money laundering to conform to international
standards; and working with foreign governments to help prevent
their penetration by organized crime.

We must recognize that developing countries, with weak
judicial systems and poorly equipped and trained police forces, are
easy game for organized criminal groups. Similarly, countries
facing difficult transitions into democracy and privatization,
coupled with the advances in technology, are ripe for exploitation
by organized criminals. The results are not only increased
instability within those countries, but an increased risk of crime
reaching our shores.

Specifically, the rise of organized crime in Russia, the Newly
Independent States, and Central Europe is a growing concern to the
U.S. law enforcement community. The Federal Bureau of
Investigation reports that money laundering is one of the most
serious concerns of Russian and Eastern European law enforcement.
This activity is not confined to the region. According to FBI
reports, certain Russian and other Eurasian emigres are converting

210

millions of dollars worth of rubles into U.S. currency, through
transactions with U.S. financial institutions and businesses.
While some transactions may involve legitimate movement of funds,
there are many indications that other of these funds originate from
fraud, theft, and organized crime within Russia and other former
Soviet Republics.

2 . We must train our foreign law enforcement counterparts in
investigating and prosecuting financial crimes:

International cooperation is crucial to combatting transnational
organized crime. One of the most important steps in we must take
in fighting international financial crime is increasing our efforts
to assist and train foreign law enforcement officials. By so
doing, we establish regular channels for exchanging information
that identify the members of organized criminal groups and their
modus operandi .

As you may know, the Federal Bureau of Investigation ("FBI"),
the Drug Enforcement Agency ("DBA"), and other United States law
enforcement agencies are all involved in extensive police training

211

initiatives in Central Europe, Russia and the Newly Independent
States ("NIS"), which are funded by the Freedom Support Act ("FSA")
and the Support Eastern European Democracy Act ("SEED") . These and
other agencies, with significant support from the State Department,
are also actively involved in an exciting new project, the
International Law Enforcement Academy in Budapest ("ILEA"), which
the FBI spearheaded, and which is already providing important
training to mid-level police managers in the region.

ILEA trains managers from Eastern European law enforcement
bodies on investigative techniques and philosophies relating to all
types of crimes, including white collar crime and organized crime.
These law enforcement managers can then take what they have learned
back to their own countries and apply it to their own
investigations. In addition to the regular training sessions, the
center is used for various international working groups, wherein
case-specific issues are discussed and information is shared among
the various countries' law enforcement representatives.

212

Also, under a program funded by the U.S. Agency for
International Development ("USAID"), we have two prosecutors
working in Moscow. They are assisting with reform of criminal
laws, including much needed legislation to combat organized crime.
At the invitation of the Russian Procuracy and Ministry of Justice,
they have provided specialized training to Russian prosecutors and
judges. They have also begun to act as instructors in training
programs organized by the FBI and other law enforcement agencies.

Through these types of efforts, we are able to build
relationships with foreign law enforcement officials that enhance
our ability and their ability to fight international organized
crime .

3 . We must do everything possible to ensure that the United Sates
eund foreign countries are not safe havens for criminals:

Not only do we need to increase our efforts to assist and
train foreign law enforcement officials in investigating financial
crimes, we also must do everything possible in this area to secure
mutual legal assistance agreements and treaties that permit the

213

sharing ot crimxnal intelligence. Some toreign law enforcement
officials need the legal authority -- as we now have --to exchange
information currently protected from dissemination.

Just as the international financial community needs honest and
accurate information if it is to function properly, so we
prosecutors need accurate information about criminals who have
infiltrated that community. This is particularly important in a
world where the criminal and his victim may be linked only by two
computer terminals thousands of miles apart, and where crime may be
committed with stolen access codes or counterfeited credit cards.
Obviously, the investigation of such crimes becomes more difficult
when the perpetrator and the victim reside in different countries;
are governed by widely disparate financial laws; and have never met
one another.

It is not uncommon, for example, for United States law
enforcement agencies to learn of the electronic --or even physical

movement of huge sums of money said to be the proceeds of

criminal activity into or through United States banks from Eastern

214

Europe. However, the documentation and witnesses necessary to
demonstrate, first, that a fraud or theft has occurred under the
laws of another country and, second, that the monies being passed
through United States banks are the proceeds of such crimes are
quite often unavailable. As you know, our criminal money
laundering statutes apply only where there is evidence of
"specified unlawful activity," that is, unlawful activity
enumerated in the money laundering statute, 18 U.S.C. §1956.
Consequently, what may or may not be a money laundering transaction
can be determined only through a full exchange of information and
documentation between the affected countries.

One sign of progress in this area is the mutual legal
assistance agreement between the United States and Russia, which
took effect on February 5 of this year. This agreement provides in
part for:

I. Mutual assistance in providing testimony,
documents, locating and identifying persons, and
executing searches and seizures; and

215

II. Forfeiting assets.

We hope this agreement will generate significant cooperation as

well as the disclosure of financial records needed to detect or

confirm the illegal infiltration or abuse of our respective

financial communities.

I
Just as mutual legal assistant treaties provide prosecutors

with the information necessary to identify and pursue criminals,

extradition treaties . constitute the primary means by which

prosecutors secure the return of international criminals for

prosecution. We are, in partnership with the State Department,

actively negotiating extradition treaties where they do not exist,

and are also updating those which do not, as drafted, provide a

reliable means for obtaining the return of fugitives. We must work

with the other nations of the world toward the goal of ensuring

that criminals have nowhere to hide.

Also, we must encourage foreign countries to adopt criminal

laws that will enable them to prosecute financial fraud and access

device schemes and recover the proceeds of those schemes. For

216

example, we must continue to work aggressively to ensure that other
countries pass money laundering laws that will remove these
countries as "safe havens" for financial crimes.

Additionally, we must also make sure that our laws stay
current with the rapid technological advances that are being used
in the financial fraud and access device schemes. Moreover, we
should ensure that we have the mechanisms necessary to strip
financial fraud schemers of the profits they generate through their
schemes and the computers, access devices, and other machinery and
facilities they use to implement their schemes.

Finally, in our own country prosecutors and bank regulators
also need to share more information with each other. For example,
when foreign banks apply to enter the U.S., particularly those from
countries recognized as posing major organized crime threats, our
current system does not require regulators to notify law
enforcement either of a foreign bank's application to establish
operations in the United States or of the ultimate approval or
rejection of such an application. Thus, the law enforcement

217

community is seldom aware of the applicant bank's commercial
intentions, and is unable to conduct research on or otherwise
investigate the applicant bank prior to the bank's commencement of
business in the United States. By the same token, regulators often
are unaware of information the law enforcement community may have
regarding the applicant bank, its customers, and any criminal ties
it may have. The law enforcement community and regulators could
both benefit from an enhanced dialogue that encourages more
information flow between them, without encroaching on the other's
authority. This is an avenue that the Department of Justice
intends to pursue.

*****

Once again, I am grateful for the opportunity to appear before
the House Coqjmittee on Banking and Financial services today to give
you the Department's views on international organized crime. I
look forward to working with the distinguished Members of the
Committee, and my colleagues here today, to combat international
organized crime.

218

STATEMENT

BORIS F. MELNIKOFF

SENIOR VICE PRESIDENT
WACHOVIA CORPORATION

on behalf of

THE AMERICAN BANKERS ASSOCIATION

befbfctlie

COMMITTEE ON BANKING AND FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES

FEBRUARY 28, 1996

219

OVERVIEW OF THE U.S. BANKING INDUSTRY'S EFFORTS
TO ELIMINATE FRAUD

Good Morning Mr. Chairman and members of the Ck>mmittcc, I am Boris F. Mclnikoff,
Senior Vice President and Director of Corporate Security for Wachovia Corporation in
Adanta, Georgia. I am here today representing the American Bankers Association (ABA) of
which I serve as their Money Laundering Task Force Chairman. The American Bankers
Association is the only national trade and professional association serving the entire
banking community, from small community banks to large bank holding companies. ABA
members represent approximately 90 percent of the commercial banking industry's total
assets, and about 94 percent of ABA members are community banks with assets less than
$500 million. ABA has been asked to discuss money laundering trends and other types of
financial fraud both domestically and internationally. We welcome this opportunity to
oudine for the Committee, the banking industry's efforts in deterring all types of financial
fraud. ABA believes that our response to this problem has been strong and our ongoing
efforts successful. Clearly, all parties can do more and we appreciate the Committee's
interest in this issue.

The Committee has indicated its concern with the threat of organized criminal groups to
the international financial system and while the ABA shares that concern, we must also
emphasize that die U.S. financial industry addresses fraud, whether committed by groups
or individuals, on an ongoing basis in a variety of ways. The industry is working diligently
with our government counterparts to ensure that the financial community has all the
appropriate tools to combat all types of bank fraud. The ABA is committed to diat result
and wc have created educational mechanisms so that our members arc prepared for financial
crimes and know best how to respond to that problem.^

VARIOUS TYPES OF BANK FRAUD

The Committee seeks ABA comments on the various types of financial crimes associated
with organized groups. Many of the crimes can occur on a random basis so trends will be
the same, regardless of who commits the crime. ABA, as well as many other groups, has
tried to estimate the scope of the fraud problem. While there does not seem to be a

^On April 1, 1996 all of the federal financial agencies will require banks and other
financial institutions to file suspicious activity reports or SARs with the Financial Crimes
Enforcement Network (FmCEN). This new streamlined reporting system, that will gready
enhance the efficiency of reporting possible crimes against the financial community, is the
subject of three seminars sponsor»i by die ABA in early April and produced with the help
of FmCEN, the Federal Reserve Board, U.S. Secret Service and die FBI. This joint
endeavor is just another example of die ongoing alliance between banking and the
govemaient that will better equip our industry to respond to fraudulent activity.

iASSOOATION

220

consensus on the size of money laundering both in the U.S. and abroad', we have several
estimates on other types of fraud.

For example, one of the major crimes committed against banks and other businesses is
check fraud.' Our Association completed a survey of check fraud losses in 1994 and those
results are attached to this statement. The estimate for industry losses from diat survey was
$815 million, up from $568 million in the last survey (1991) — a 43.5% increase. The
survey respondents told us that check fraud can be perpetuated with forged signatures,
forged endorsements, check kiting, or counterfeit checks. This may occur dirough
organized efforts, but it is not limited to those activities. In order to address diis problem,
banks have, anwng other things, indicated a need to educate their corporate customers
about their responsibilities for preventing check fraud. In addition, the indiistry stresses
diat diere must be employee training for firont-line personnel, managers, and/or backroom
personnel. Other popular initiatives to deter fraud include account screening, signature
verification and deposit review. Many banks also verify questionable or irregular items such
as signatures and check stock, or phone customers to verify large dollar amounts. To repeat
Mr. Chairman, the problem of check fraud b harmful to banks and the economy whether
initiated by organized groups or by individuals. ABA continually provides information to
its members on how to protect against being a victim of fraud but vigilance is the key.* As
we continue to discuss the industry response to fraud, it must be emphasized that there is
one common thread to all deterrence ~ know your customer. We will amplify this concept
later on in this statement.

In addition to counterfeiting and other elements of check fraud, fmancial institutions also
fieel the brunt of credit card fraud* and commercial loan fraud. In 1994, account takeover
fraud " one type of credit card abuse, resulted in a $37.3 million increase from 1993.
While there is no one factor that led to this increase, security officials have stepped up their

^Estimates on money laundering range from $300 billion annually to $85 billion.
However, according to an Office of Technology Assessment (OTA) study, "this and other
estimates of die scale of money laundering must be viewed skeptically...(n)o one can be sure
how much money is laundered."

^Check fraud is also exacerbated by the federal Expedited Funds Availability Act (12
use 5001 et seq.). That law requires depository institutions to provide customers dieir
funds before the depository institution knows that the check deposited is payable.
Criminals iise this law to their advantage. (The Federal Reserve Board pursuant to the
1994 Community Development Banking Act, is currently preparing to conduct a study on
the advisability of revising that law to extend the time banks may hold some deposits.)

'According to Bankers* Hodine, a monthly newsletter covering fraud and other issues
for front-line personnel, counterfeit check activity has forced the National Fraud
Investigation Center, Inc. (NFIC) to create a counterfeit check database with the FBI and
the Secret Service. This is another example of banks working with the government to solve
the fraud problem.

"Excerpts from ABA's Bank Card Survey for 1995 are also attached.

AMERICAN MMOK ASSOOATKMI*

221

detection efforts. Commercial loan fraud losses average $175,000 per loss according to the
FBI. A "Fraud Assessment and Impact Study" compiled by NFIC and Trans Union found
that the top five fraud concerns for banks were check fraud, firaudulent accounts, new
account fraud, counterfeiting and true name fraud. All of these problems can be and are
being addressed by extensive training through ABA's conferences, videos and educational
publications. For example, our Association publishes a monthly "Bank Security and Fraud
Prevention" newsletter which we have attached to this statement. We are also proud of our
National School for Bank Security, a week-long training program held March 3-8, 1996 at
Georgetown University.*

Mr. Chairman, ABA does not believe that the enactment of any new or modified banking
or criminal laws will be a better method to combat the firaud threat, but we would be
happy to comment on any spedflc proposals that the Committee may be considering.

MONEY LAUNDERING - THE U.S. RESPONSE

The ABA has long supported the efforts of the Congress and the U.S. Government in its
drive to address money laundering activity throughout die world.' ABA was pleased to
support the Money Laundering Suppression Act of 1994 (P.L. 103-325) which was
enacted to improve the regulatory process covering the Bank Secrecy Act. Due to that
legislation, FinCEN has successfully reduced the size of the Currency Transaction Report
(CTR) and are close to further str^mlining the entire cash reporting process. All of these
initiatives will assist the industry and the government in their efforts to stop money
laundering by refocusing our efforts from routine reporting to suspicious transaction
reporting. FmCEN deserves much of the acclaim for spearheading the regulatory burden
reduction process that benefits both bankers and law enforcement.

To continue on the point of reducing the amount of cash reports, ABA would like to
reemphasize the partnership developed in the past several years between die government
and the banking industry. This alliance needs to be highlighted because the same
relationship is not common in foreign countries. The lack of private-public sector
teamwork internationally needs to change if the goal is improved (and more effective)
vigilance on the part of bankers. Specifically, the recent Undersecretary for Enforcement at
the Department of Treasury initiated, and the Director of FinCEN carried out, the
formation of a Bank Secrecy Act Advisory Board comprised of private and public sector
representatives to meet on a regular basis and discuss trends in money laundering, the

'In addition to ABA's efforts, other organizations recognize the scope of firaud. The
International Banking Security Association (IBSA), a group in which ABA actively
participates, has just released a booklet on International Fraud. That document is attached
for your information.

'ABA supported the original money laundering proposals that eventually became 18
U.S.C. 1956. I was fortunate to have represented ABA in the first Congressional hearing
on this subject in 1985. The Association has continued its efforts to support fair and
necessary legislation as well as working to improve the current regulatory scheme.

lAasocMTioiir

222

current regulatory structure and what changes were necessary to streamline and improve die
system. Over thirty individuals meet and engage in candid discussions which have resulted
in an improved regulatory system. This "forum" was duplicated at a January, 1996
meeting in Paris with international representatives prior to die Financial Action Task Force
(FATF) meeting and should be the goal for all nations.

In the international arena, the Financial Action Task Force serves as a forum for ideas and
recommendations on how to eliminate money laundering activities not only in our own
countries but with our neighbors diroughout the world. FATF is to be commended for its
dedication to this worthy goal and it is imperative that the private sector lend its expertise
and energy to increasing the obstacles for narcotics traffickers and odier criminals who
illegally u^e our fmancial institutions to move their ill-gotten gains. ABA has supported
these efforts but, as we previously mentioned, die record of our international counterparts
has been mixed, at best.

The ABA stands ready to continue its decade-long involvement in educating bankers and
other private sector representatives on the need for compliance and vigilance with money
laundering laws and activities. We have worked widi FATF and its members so that one
day we can all trumpet the end of money laundering in fmancial institutions everywhere.
We urge the Committee to go on record advocating the need for increased international
cooperation.

A. Trends in Money Laundering

The fu^t thing that one must understand about money laundering in the United States is
that the financial industry is extremely varied, with institutions ranging from small
community banks to large international financial service providers. Thus, the experiences
will differ widely as to what is attempted by criminals. Much of what we have seen in the
past several years, in the aggregate, has been continued attempts to evade the cash reporting
requirements (i.e. through structured transactions), the creation of "front" companies
designed solely to move the proceeds of illegal activities and complicated investment
schemes. In addition to those well-known activities, domestic financial institutions are
wary about transactions with certain countries that are considered drug havens by U.S. and
international authorities. We have also seen a rise in possible illegal transactions in certain
financial institutions that are not regulated by federal banking agencies. As with any
general statement, it must be emphasized that many "non-bank" fmancial institutions are
working toward developing improved compliance systems but the amount and frequency of
federal examinations will often dictate the seriousness by which those institutions take anti-
money laundering deterrence responsibilities. The ABA acknowledges our own industry's
past shortcomings in this area but our progress is well documented and we are confident
diat other flnancial service providers share our support for improved compliance.

The trends in money laundering must, by definition, be discovered by law enforcement and
state and federal bank regulators since those entities are better equipped dian bank officials
to discover new forms of criminal activities and to distribute this information to all
concerned parties. The U.S. government has been working toward an improved "alliance"

AMBOCAN MNKBS ASSOCUnON*

223

with the private sector to share information on new trends and schemes and we are
optimistic that die sharing of critical information will continue. The ABA has offered its
services in this regard and we urge our counterparts both in the U.S. and abroad to do the
same.*

Mr. Chairman, while there are many examples of cooperation widi the government, I
would like to offer one strong example. The level of success in deterring money laundering
achieved by the models of industry-government cooperation in such places as Oklahoma
speak for itself. The following are money laundering schemes uncovered by the joint
efforts of Oklahoma bankers and law enforcement agents:

• A financial institution reported suspicious activities by a group of individuals
who were opening new accounts. As a result, a major cocaine dbtribution
organization was uncovered. This organization had deposited in excess of ten
million dollars in Swiss banks. The investigation resulted in the following seizures:
a $375,000 home in Oklahoma City; $1,000,000 in cash in an Oklahoma City
bank; an airplane located in Tucson, Arizona, valued at $5,000,000; and in Reno,
Nevada, automobiles valued at $100,000, and gold and jewelry from a safe deposit
box valued at approximately $3,000,000.

• A financial institution employee contacted the Fmandal Task Force in
Oklahoma concerning a ne«v account holder who was receiving wire transfers from
California and then withdrawing the money in currency (approximately $50,000
each wire). This information uncovered a theft ring which had stolen almost four
million dollars in microchips from a business in Oklahoma City.

• Three ftnandal institutions independendy reported suspicious transactions
concerning the purchase of one or two cashier's checks in amounts of $3,000 to
$4,000 with currency. This lead initiated an investigation which uncovered an
international heroin organization which had laundered in excess of one million
dollars through Oklahoma City banks in less than twenty-three days. The
individuals who purchased the cashier's checks, known as smur£s, went to as many as
twenty banks in one day acquiring cashier's checks. Lsw enforcement seized over 26
pounds of heroin valued at twenty million dollars in Oklahoma City.

• An alert employee at a financial institution reported that a customer was
conducting repeated cashier's checks transactions in increments less than $10,000,
the threshold for bank reporting. As a result, the customer, who had embezzled his
blind grandmother's life savings of $350,000, was arrested. This same bank

*rhe ABA has been fortunate to have received the support of many government agencies
in our seminars, conferences and schools that cover oraney laundering. During the past 10
years, our members have heard from the Federal Reserve Board, the Office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Treasury
Department, the Department of State, the U.S. Customs Service, the Internal Revenue
Service, the Justice Department, FmCEN and many others. This support is critical if
bankcfs are to receive proper training.

AMEMCAN BMHSK ASSOCUTION*

224

reported anodier suspicious transaction that resulted in die recovery of embezzled
funds totaling $125,000 from an out-of-state company and of $66,000 from a local
automobile dealer who was wanted in several states for similar embezzlement
offenses.

• A Bank's BSA Compliance Officer called the Fmancial Task Force when an

elderly gendeman began taking large cash advances on a number of credit cards.
Because of this call, an investigation ensued diat uncovered fraudulent telemarketing
schemes in Las Vegas, Nevada and prevented the gendeman from losing his entire
life savings.

The Oklahoma model of partnership (which has been duplicated in California, Arizona and
Florida) strengthens both the banking industry and the government and is made possible
only through the efforts of dedicated public servants that work closely and well with our
industry.

Finally, we would be remiss if our association did not commend the various federal agencies
for their efforts to train foreign law enforcement, regulators, and bank officials on current
detection and prevention efforts. ABA has participated (as have several major U.S.
institution bank officials) in a global attempt to share information and offer advice on how
to craft effective fraud deterrence programs. The United States Customs Service, the
Federal Reserve Board, FinCEN, various U.S. Attorney offices as well as many others have
developed seminars, conferences and other forums to train our international counterparts in
the critical area of fraud prevention and detection. The programs do not stress die U.S.
regulatory and legal model as the answer to worldwide money laundering but create an
opportunity for information exchanges that gready assist all participants. This area of
support gets litde recognition and that needs to be remedied.

B. Coantenneasiires

Another area that we have been asked to cover concerns what countermeasures have U.S.
financial institutions developed in order to both comply with our regulatory responsibilities
and to develop an appropriate proactive response to money laundering. While the U.S.
docs not now have a regulation in place (although one is expected in 1996), the ABA has
long supported the concept of formalizing a "know your customer" policy. In 1990, the
ABA surveyed its membership to determine the extent to which institutions already had
policies diat could be construed as Know Your Customer procedures. At that time, over
86% of the respondents had KYC procedures of some type.* The task force which I chair

* In addition, then Chairman of ABA's Money Laundering Task Force, Earl Hadlow,
told a U.S. Senate Committee in 1989 that "[t]he emphasis must shift, in a logical and
reasonable manner, from currency transaction tracking to know your customer in all facets
of transactions. A reasonable approach to die problem can only be accomplished by die
concentrated cooperation of the government and the financial services industry." Mr.
Hadlow went on to add that:

ANKHCAN MMCBIS ASSOOATKMI*

225

also developed recommendations in this area. Excerpts of what we concluded follows.

First, it must be emphasized that the Treasury Department [now FmCEN] now has the
authority to require financial institutions to issue "Know Your Customer" (KYC)
procedures based on the passage of the 1992 Annunzio-Wylie Money Laundering Act (Pub.
L. No. 102-550). While the concept of KYC has long been a cornerstone of prudent
banking, this will be the first time that the government will mandate that all fmancial
institutions create such procedures.

Therefore at that time and once again, the Task Force states that the banking industry is
poised to cooperate witii the Treasury's efforts to formalize what, to a large degree, already
exists in die commercial banking industry. ^'

Much of the banking industry's "countermeasures" will stem from a solid Know Your
Customer procedure. The Task Force also concluded that, in a KYC policy, establishment
of a tiered monitoring system of certain accounts and activities may be appropriate. ABA
stresses that if there are no "red flags" or other indications of unusual behavior then
monitoring need not take place. If, based on government and industry warning signs,
there is an indication of illegal activity tiie bank would be required to conduct more
research or analysis to determine if there is a problem.^^ It must be emphasized that the

ABA's Money Laundering Task Force, and the industry in general, recommend that
financial institutions base their regulatory compliance on KYC. This means activities
such as verifying the business of a new account holder and reporting activity in an
account that is disproportionate to diat customer's known business. Immediate
reaction to unusual transaction activity should be the goal for all banking
institutions. Identification procedures beyond the regulatory minimum should be
considered to include situations such as verifying whether a document for
identification that is seemingly altered is genuine. With these several concepts in
play, individuals will fmd it increasingly difHcult to deliberately utilize a fmancial
institution for illegal purposes.

Hnandal institutions already have a well known KYC standard that does ensure
compliance with both the Money Laundering Control Act and the Bank Secrecy Act.
While we may not always agree as to what constitutes KYC, it is important tiiat this
concept be advanced within the industry.

'• We have attached ABA's KYC Policv Statement, issued July 1994.

*^ For example, one large finandal institution, in its Code of Ethics states the following:

Money Laundering Activities/Bank Secrecy Act

Both federal and state law prohibit the laundering of money.
Money is laundered to hide the criminal activity associated with
it, including the crimes by which it is generated, e.g., drug
trafikking, tax avoidance, counterfeiting, etc Employees need

tASSOCUTMN*

226

risk level associated with a well-known and respected corporation differs from that of some
other entity. In addition, risks will vary along product lines. ABA has advocated that any
final rules which are developed should specifically permit such differentiation. As long as
HnCEN allows flexibility in handling customer monitoring, a KYC policy that includes this
requirement could and will receive solid support from our industry.

C. Other Issues

In November 1995, ABA's Executive Vice President, Don Ogilvic wrote to FATF
President, Ronald K. Noble, in response to a request to review long standing FATF
recommendations, on creating effective money laundering enforcement programs. I will
summarize several key points that we made at that time.

1. Kevicw of FATF Bccommcndations:

Much of the FATF recommendations (i.e. passage of laws criminalizing
money laundering, reporting of suspicious transactions and due diligence)
have been implemented in U.S. banks and in place for many years. The ABA
remains committed to the need for policies requiring non-banks as well as
banks to keep certain records and identify customer transactions. We believe
that our indiistry has an excellent record of emphasizing account-opening
procedures in employee training programs as oudined in several FATF
recommendations. We have also pointed out the need to streamline, and in
some instances, eliminate reports and records on routine transactions, and die
federal agencies responding to the Congress have already begun diat process.
Therefore, while we support having several of the U.S. Bank Secrecy Act laws
being placed on all financial institutions throughout the world, changes and
modifications to those laws are also necessary.

ABA also stressed diat recommendations addressing the reporting of
suspicious transactions and other "Know Your Customer" procedures are
important requirements for all institutions to assist in money laundering
deterrence, but that financial institutions must be protected from civil and
criminal liability for fulfilling their responsibility to detect and report
unusual or potentially criminal violations as well as closing accounts on
individuals who have acted contrary to law and regulation.

to "know their customer," and be alert to the dangers to the
bank should it, even unwittingly, become involved in receiving
or laundering proceeds of crimes. Regulators require banks to
report any known or suspected criminal activity, such as the
laundering of monetary instruments or structuring of
transactions to evade Bank Secrecy Act reporting requirements.
Employees should contact their Regional Security Department
immediately in the event any known or suspected criminal
activity or transaction comes to their attention.

MMEMCAN MNKEW ACSOOATION'

227

Finally, the FATF recotnmendations concerning cooperation and mutual
assistance on an international basis are also critical to successfully create an
atmosphere of vigilance on the part of the public and private sector.

2. Implication of Emerging Tedinoldgies:

With the advent of smart cards, banking on the internet and other
"cyberspace" financial services, both the government and die industry must
be prepared to address diese tremendous new technologies as potential
vehicles for money laundering. This must be done before, not after, they
become commonplace. In addition, ABA has created a Payment Systems Task
Force that is considering policy issues relating to the security of these new
technologies.

Mr. Chairman, we would urge the Congress to aggressively support die action of the FATF
so that all participating countries will take seriously die need for unity in combatting
financial crimes.

ABA RECOMMENDATIONS

As this Committee continues its review of global financial crimes and how best to address
firaud, our Association would ask that you consider the level of resources available to law
enforcement in die United States. Due to the lack of fiinds in many agencies, frauds
committed under certain diresholds (i.e. $100,000 in New York City) are simply not
prosecuted by U.S. Attorneys or investigated by law enforcement. Therefore large scale
frauds, committed over time, may go unreviewed because of the dearth of manpower hours
that can be dedicated to such offenses. While this b not a slight at our friends in law
enforcement, it is nonetheless frustrating and harms fmancial institutions in dieir goal of
ensuring the safety and soundn^s of their industry. In fact, one of the major changes to
the new suspicious activity report was to substantially raise thresholds for reporting
frauds.^' This was done because many small dollar frauds simply cannot be handled by
the government. ABA recognizes that the batde for appropriations encompasses many
competing interests, but the ever-dwindling amounts given to combat fraud is
disappointing. Simply stated ~ our partners in the government need more tools to solve
financial crimes.

'^In addition to increasing reporting thresholds, the new SAR (which replaces the
criminal referral form) will have two additional benefits ~ only one (1) filing will be
required by financial institutions (from the current 6) and banks will receive software so
that the forms can be completed electronically. The Bank Fraud Working Group deserves
credit for agreeing to diis new process ~ first proposed by and led by the leadership of the
Federal Reserve Board.

AMERICAN BAMtBB ASSOOATtOir

228

CONCLUSION

The American Bankers Association has long advocated adherence to Know Your Customer
principles as a means to deter fraud and protect the banking industry. Those concepts can
work in the area of money laundering as well as for other fmancial crimes. We humbly
recommend that our international counterparts consider the same principal because
organized criminal groups can only succeed if vigilance is poor or non-existent. By
working together, fmancial institutions and law enforcement can craft workable, flexible
and reasonable regulations that will deter criminals from using our banking system to
launder the process of illegal activities. This can, and does work in the United States and
should be replicated abroad.

Thank you for this opportunity and I would be happy to answer any questions.

AMBVCAN BANKBIB ASSOaATWN

229

Attachment 1

1994 CHECK FBAUD SURVEY
Management Summary of Survey Results

I. Introduction

II. Methodology

III. Management Summary
rv. Recommendations

Figure 1
Figure 2
Figure 3
Figure 4

Figure 5:

Figure 6:

Banks Reporting 1993 Check Fraud Losses . .
Check Fraud Losses - Industry Estimate ....
1993 Check Fraud Losses by Type of Account
Expected Fraud Loss Exposure in 12 Months

Community Banks

Expeaed Fraud Loss Exposure in 12 Months

Mid-Size Banks

Expeaed Fraud Loss Exposure in 12 Months
Large Banks

Page

10
11

ANil.KU.AN
ASSOCIATION

230

I. INTRODUCTION

A representative group of banks were surveyed in April 1994 to coUea information on their check
fraud experiences. Check fraud contributes substantially to bank losses. The check fraud problem has
recently received increased attention. Regulation CC imposed tighter check deposit availability
requirements than in the past New desktop capabilides of producing counterfeit checks has exposed
the industry to greater risks of check fraud and losses.

The primary objective of this study was to determine the extent of check fraud losses for 1993 and
to assess the impact of reguladons and other &ctors on such losses. In addition, the siuvey identified
actions taken or planned by banks to reduce check fraud losses, for example, employee training and
conversion to electronic payments. The survey also identified member services that banks want from
ABA to assist them in controlling check fraud.

The opinions and evaluations contained in this report represent those of individual authors and are
not necessarily the views of the American Bankers Association. Please contaa ABA, Surveys and
Statistics Division (202) 663-5176 if you have any questions or comments.

II. METHODOLOGY

A mail sample survey designed by the ABA Check Fraud Task Force colleaed data on check fraud.
The 8-page, 41 -part survey covered 5 major topics:

— Funds availability policy

— Safeguard exceptions

— Return items

— Check fiiaud losses

— Check fraud prevention

General information about survey participants was also requested.

A stratified random sample of 2,925 banks was selected by asset size to obtain information
representative of the industry. The survey was conducted during the second and third quarten of
1994 with two mailings. FoUow-up interviews were conducted when necessary. By the cutoff date,
a total of 309 returns had been received, for an overall response rate of 10.6 percent

All quantitative data were compiled by three categories of banks, based on asset size as of year-end
1993:

1. Banks with less than $500 million in assets, herein denoted as community banks;

2. Banks with $500 million to $4.9 billion in assets, herein denoted as mid-size banks; and

3. Banks with $5 billion or more in assets, herein denoted as lar^e banks.

This division by size clarifies differences in the impaa of fraud and in preventive methods used by
banks.

231

MUMBER OF BANKS IN U.S.

AND SURVEY PARTICIPANTS

Community
Banks

Mid-Size
Banks L»r£t Banks

Total

Number of banks in
U.S. (»iofi:/31/93) *

10,335

497 122

10,954

Number of survey
panidpants

199

77 33

309

Unless otherwise indicated, median values of the number and dollar amounts were used to describe
typical check fraud losses experienced by community, mid-size, and large banks. For certain
questions, survey data were extrapolated to the industry level to &cilitate comparisons between 1992
and 1994 results. When appropriate, statistical tests were conducted to identify dififerences in the
req>onse$ of community banks versus mid-size and large banks. Selected qualitative (written)
comments were extraaed and analyzed separately. A few of these comments are included in this
repon for illustrative purposes.

III. MANAGEMENT SUMMARY

A. GENERAL INFORMATION

Most (64.4 percent) of the 309 banks responding to this survey had assets of less than S500 million
as of year-end 1993, while 24.9 percent had assets of $500 million to $4.9 billion; the other 10.7
percent had S5 billion or more in assets. Community banks reported deposits under S500 million
(97.5 percent had less than S300 million in deposits). Mid-size banks had deposits of between $300
million and S5 billion (93.5 percent had S500 million to $5 billion). Large banks reported deposits
of SI billion or more (typically S5 billion to S50 billion).

1. 1993 Check Deposits On-Us and Non-On-Us: Number and DoUar Value

At community banks, an annual median volume of 451,000 checks (S168 million) per bank were
deposited non-on-us (transit), with another 100,000 checks ($36 million) dq>osited on-us. Among
mid-size banks, an annual median volume of 8.3 million checks ($3.4 billion) were dq>osited non-on-
us per bank, and 3.6 million checks (SI. 7 billion) were deposited on-us. Large banks received 97.8
million transit items (S39 billion) and 5.3 million on-us items ($6.3 billion). As expected, transit
items outnumbered on-us items by a large margin.

2. 1993 Checks Drawn Against Accounts On-Us: Number and Dollar Value

As paying banks, 28 community banks reported a median volume of over 306,000 checks drawn
against their accounts in 1993, with a median value of S99.5 million per bank. In contrast, 23 mid-
size banks reported a median volume of 7.4 million checks drawn against accounts, and a median
value of S2.7 billion. Eleven large banks had a median volume of 58.9 million checks per bank drawn
against their accounts in 1993, with a median value of S35.3 billion.

The variation in check volume and dollar value for checks deposited into accounts or drawn against
accounts was substantial within individual bank size groups. For community banks, for instance,

Ammiean Bank»r$ AMOctetion - 1994 Chaek Frmud Surwy

232

checks deposited non-on-us ranged from 2,000 to 4.3 miliioD. For mid-size banks, the range was
from 33,000 to 184.7 million checks. For large banks, the range was from 165,000 to 553 million
checks. The dollar value of these deposits for community banks ranged from $900,000 to $1.5
billion; for mid-size banks, from $10 million to $173 billion. Deposits into accounts at large banks
ranged from $17 million to $685 billion. As could be expected, banks' exposure to check fraud
increased with check transaction volume and value.

3. Deposit (Check) Processing Facility and Arrangements

Most respondents reported that they processed checks at an on-prcmise facility. On-prcmi$e was the
arrangement for 62.1 percent of community banks, with higher proportions found for the mid-size
banks (74.0 percent) and large banks (81.8 percent). Most surveyed banks used their own operations
to process checks. The proportion for community banks was 54.8 percent, compared to even higher
proportions for mid-size banks (67.5 percent) and large banks (75.0 percent). A holding company
performed check processing for a few banks in each asset size category, including 17.6 percent of
conmiunity banks, 23.4 percent of mid-size banks, and 12.5 percent of large institutions.

Community banks were more likely than larger banks to use two other check processing
arrangements: a correspondent bank or a nonbank service company. More community banks used
a correspondent bank to process checks (15.4 percent) than did mid-size banks (6.5 percent) or large
banks (3.1 percent). Also, 20.2 percent of commimicy banks used a nonbank service company to
process checks, while only 6.5 percent of mid-size banks and 9.4 percent of large banks reported such
an arrangement.

B. FUNDS AVAILABIUIY POUCY

Most surveyed banks reported funds availability to customen on the next business day or immediately
for local checks, whether the customer accounts were individual consumers or commercial accounts.
For nonlocal checks, funds were generally available the next day or immediately, for either individual
or commercial accounts.

1. Funds Availability Policy for Accounts That Do Not Qualify As Exceptions Under
Regulation CC

Funds availability policies for local checks varied by bank asset size: more community banks provided
next day/immediate availability than did mid-size banks or large institutions. On consumer demand
accounts, 93.5 percent of community banks had a published policy of next day/immediate availability
for local checks, compared to 75.0 percent of mid-size banks and 72.7 percent of large banks. For
small business demand accounts, 93.4 percent of conununity baniks had a policy of next
day/immediate availability, while 77.5 percent of mid-size banks and 77.4 percent of large banks had
this policy. On large corporate demand accounts, over 80 percent of all banks reported a policy of
next day/immediate access, including 93.3 percent of community banks, 80.6 percent of mid-size
banks, and 76.7 percent of large banks.

A similar pattern was found for funds availability policies for nonlocal checks. More community
banks provided next day/inunediatc availability than did mid-size banks or large banks. On
consumer demand accounts, 68.1 percent of community banks bad a published policy of next
day/^mimediate availability for nonlocal checks, compared to 50.7 percent of mid-size banks and 39.4
percent of large banks. For small business demand accounts, 67.0 percent of conununity banks had
a policy of next day/immediate availability, as did 50.0 percent of mid-size banks and 51.6 percent
of large banks. On large corporate demand accounts, 67.8 percent of community banks, 50.0

Amtiean Banku-u AatodBtion - 1994 Ch»ek Fnud Sunny

233

percent of mid-size banks, and 51.7 percent of large banks rcponed next day/immediate access.
From 1991 to 1993, next day /immediate availability of funds at banks industrywide increased
significandy. In 1993, more banks made funds available the next day/immediately for both local
checks and nonlocal items on each type of account than did so in 1991. Prompt f\inds availability
have become increasingly important to relationship management as market competition has
intensified.

2. Collection Mechanisms for Transit Items

Banks collected their transit items primarily through the Federal Keserve bank or a correspondent
bank. The proportion of deposits collected tlirough the Federal Reserve bank was 49.1 percent at
communit>' banks, 56.4 percent at mid-size banks, and 40.9 percent at large banks. The Federal
Reserve bank was the primary coUecdoD mechanism for banks of all sizes.

More community banks coUeaed through a corre^>ondent bank (46.5 percent) than did mid-size
banks (18.8 percent) or large banks (28.9 percent). Conversely, more large banks coUeaed transit
items tiu-ou^ a clearinghouse (24.4 percent) than did mid-size banks (16.7 percent) or community
banks (only 2.3 percent).

3. Availability of Funds Through Banks' Check Qearii^ Network

Over 80.0 percent of all banks reported that funds were available to them from local checks within
I business day, and over 95.0 percent reported funds available in 1 or 2 business days. More than
8 in 10 (83.7 percent) community banks reported that funds were available to them from local checks
within 1 business day on items deposited through dieir check clearing network, as did 85.9 percent
of mid-size banks and 93.8 percent of large banks. Most of the remainder reported access in 2
business days.

Banks did not obtain such quick access to funds from nonlocal checks. Only 42.2 percent of
community banks reported that funds became available to them from nonlocal checks within 1
bunness day on items deposited through their check clearing network, compared to 53.2 percent of
mid-size banks, and 65.7 percent of large banks. Many other banks, however, reported access in 2
business days, including 40.8 percent of community banks, 31.1 percent of mid-size banks, and 24.3
percent of large banks. Overall, almost 9 in 10 banks had access to funds from nonlocal checks in 1
or 2 business days. A large minority of banks, however, reported that it took more than 2 business
days to receive available funds on nonlocal checks.

There was no significant difference between 1991 and 1993 in the speed of receiving available funds
on deposited items by banks. During that same period, however, earlier access to dq>osited ftinds
were widely offered to bank customers.

C. SAEEGUARD EXCEPTIONS

1. Indhidoal Consumers

Most banks (63.2 percent of community banks, 66.2 percent of mid-size banks, and 57.6 percent of
large banks) occasionally imposed a safeguard excepdon to hold fimds deposited into new accounts
beyond 2 business days for local checks and 5 business days for nonlocal checks for individual
consumers. In contrast, fewer insdtutions imposed these exceptions routinely, with large banks
employing a less stringent policy.

Aamiem Banktn Asaodatien . ^994 Chtek fraud Sumy

234

More than 6 in 10 banks also occasionally imposed a safeguard exception to hold funds for large
deposits (aggregate over $5,000) made by individual consumers. However, only about 8 percent to
27 percent, depending on bank size, of survey participants imposed these exceptions routinely.

Sixty-three percent of community banks, 43.7 percent of mid-size banks, and 53.1 percent of large
banks occasionally imposed an exception for checks redeposited by individual consumers. About 20
percent of community banks and large banks imposed these exceptions routinely; a higher proportion
of mid-size banks (about 42 percent) did so.

2. Coaunercial Accounts

Most banks occasionally imposed a safeguard exception to hold funds deposited into new small
business accounts (56.0 percent to 73.0 percent), ^proximately another 18.0 percent of small and
mid-size banks did so routinely. However, about 31.0 percent of the large institutions imposed these
exceptions routinely.

More banks occasionally imposed a safeguard exception to hold funds for large dq>osits made by
small business customen, including 69.0 percent of community and mid-size banks and 58.1 percent
of large banks. However, fewer banks imposed these cxcq>tions routinely.

Similar results were found for redq>osited checks for small business accounts. Over half of the banks
occasionally imposed an excq>tion, while 16.2 percent to 34.3 percent imposed these exceptions
routinely.

Policies for exception holds on large corporate accounts differed only slightiy. Most banks
occasionally imposed a safeguard exception to hold funds deposited into new accounts for large
corporate customers. Less than 2 in 10 banks did so routinely, and many never imposed safeguards
on corporate accounts. Large corporations received fewer safeguard exceptions at large banks than
did consumers and small businesses.

More than 6 in 10 banks occasiooally imposed a safeguard cxcq>tion to hold funds for large deposits
made by their large corporate customers. Less dian 10.0 percent imposed these exceptions routinely,
and 21.2 percent to 36.7 percent never did so. Only 3.3 percent of large banks routinely imposed
exceptions for large deposits.

About one in two survey participants occasionally imposed an excq>tion for redq>osited checks for
large corporate accounts, and 10.7 percent to 28.0 percent, dq>ending on bank size, imposed these
exceptions routinely. A significant proportion, 18 .2 percent to 42.9 percent, never imposed safeguards
for redeposited checks. Mid-size banks were more likely than community banks to impose safeguards
routinely, for example, on large dcpoats and redqxKited checks.

In summary, most banks occasionally imposed a safeguard excq>tion to hold funds deposited beyond
2 business days for local checks and 5 business days for nonlocal checks. Few routinely and some
never imposed exception holds. Banks uniformly reported such a hold policy for individual
consumers, small businesses, or large corporate accounts, and for transactions involving new accounts,
large dq>osits, or redqxjsited checks. Overall, large corporations received fewer safeguard exceptions
than consumer or small business account hdders.

AiMricm B»nk»rM Astodation _ 1994 Ch»ek Fraud Suney

235

3. Changes in Use of Safeguard Exceptions from 1991 to 1993

From 1991 to 1993, the proportion of banks who routinely imposed safeguard excepdons on
consumer, small business, and corporate accounts decreased significantK*. For example, only 19.3
percent of banks ^plied safeguard excepdons on consumer accounts routinely in 1993, compared
to 29.0 percent in 1991. Decreases ranged from 5.0 percent to 10.0 percent from 1991 to 1993.

4. Frequency of Imposing Safeguard Exceptions for Instances with Cause
to Doubt Collectibility

Banks were much more likely to impose safeguards routinely when tfaey bad cause to doubt the
collectibility of funds. In 1993, 41.9 percent of community banks, 56.3 percent of mid-size banks,
and 48.5 percent of large banks routinely imposed a safeguard excq>tion to hold funds deposited
when collections were in doubt for individual consumers. Less than 9.0 percent never imposed such
excepdons when collections were in doubt. A amilar policy was reported for small business accounts.

Mid-size banks were more likely than conuniuity banks to impose safeguards routinely on individual
consumen and on small business accounts. About 4 in 10 banks (37.3 percent of community banks,
46.9 percent of mid-size banks, and 37.9 percent of large banks) also routinely imposed a safeguard
excepdon to bold funds deposited when collecdons were in doubt, even for large coiporate
customers. However, another 11.0 percent to 28.0 percent never imposed safeguard excepdons on
large coiporate customers, even when collecdbility is in doubt.

Twenty-nine banks commented on their increased use of excepdons after the implementadon of
Regulation CC. Many indicated that such holds were applied on an exceptional baas, when needed
and permitted. These holds were applied to returned items, large ATM deposits, new accounts, and
whea collectibility was in doubt. One banker stated that the holds were "virtually the only way of
protecting the bank. "

Between 1991 and 1993, the percentage of banks industrywide that routinely imposed safeguard
exceptions on consumer and small business accounts with cause to doubt collecdbility did not change
significantly, although decreases of 5.0 percent to 7.0 percent were found. For large coiporate
accounts, the percentage decrease was significant: from 46.0 percent in 1991 to 38.0 percent in
1993.

5. Impact of Written Notification Requirements on Safeguard Exceptions

Opinion was mixed about whether banks would impose safeguard exceptions more routinely if they
were not required to provide written notification on holds that meet current notification
requirements. About 3 in 10 banks said that they would impose excepdons more routinely. About
4 in 10 would not impose exceptions more routinely. The rest indicated that they had no basis on
which to judge. Competition greatly influenced bankers' reluctance to use safeguard excepdons.

D. RETURN ITEMS

1. Mechanisms to Process Return Items

The Federal Reserve Banks processed more than 60 percent of the return items. The use of other
mechanisms vaned by bank asset size. At community banks, about one-third (30.3 percent) of return
items were processed by correspondent banks. Mid-size and large banks were more likely to route
the return items through a clearinghouse.

American Banken Aaaodstion ^ 1994 Chaek Fraud Survey

236

2. Average Length of Entire Cycle for Returned Deposited Checks

The CDdrc cycle of returned deposited local checks was completed in 3 days or more, according to
71.0 percent of community banks and 75.4 percent of mid-size and large banks. In contrast, the
processing cycle for nonlocal checks takes longer to complete. Rve or more days are required for
processing nonlocal checks for most banks (69.0 percent of community banks, 56.6 percent of mid-
size banks, and 60.5 percent of large banks). Indeed, 23.3 percent of community banks and 18.4
percent of large banks stated that it took 7 or more business days to complete the cycle for nonlocal
checks. Industrywide, between 1991 and 1993, the length of the cycle for either local or nonlocal
returned deposited checks did not change significantly.

3. Timely Notification on Large, Local Bctnmed Checks

As banks of fint deposit, about 9 in 10 banks reported receiving timely notificadon of large local
checks exceeding $2,500 being returned, as required by Regulation CC. However, banks were more
likely to be notified promptly but with cxcq>dons than they were to always receive prompt nodce.
Bank size was a factor. While 37.7 percent of community banks said that diey always receive such
nodcc, only 22.1 percent of mid-size banks rqx»ted service this efficient. Conversely, 54.3 percent
of commimity banks said they were nodficd promptly but with excepdons, compared to 67.5 percent
of mid-size banks. The experience of large banks was similar to mid-size banks.

4. Holding Funds in Accounts Pending Bjeceq>t of Setumed Items

More than 8 in 10 banks indicated that they would hold the funds on their depositors' accounts
while waiting for the return of the physical item(s), after notificadon that large items (local and
nonlocal) are being returned. Dq)ending on the situation, mid-aze banks (40.3 percent) were more
likely to always hold funds than commonity banks (20.1 percent), and 30.3 percent of large banks
always hold fimds.

Forty-two banks provided comments on return item notificadon. About one in three were satisfied
with the present system, but others proposed changes or made critical comments. For example, survey
parddpants dted the need to enforce penahies for fidlure to notify or for delays in notificadon, the
desirability of mandatory use of FedUne for large checks, and the benefits of lowering the $2,500
limit. One banker observed that 'fiaud often [occurs] with items just below the 52,500 limit."

E. CHECK FRAUD LOSSES

Most survey parddpants experienced losses attributable to check fiaud in 1993. The extent of such
losses increased with bank size. Data on the number and dollar amount of check fraud losses showed
considerable variadon from bank to bank. Community banks and mid-size banks suffered more losses
as paying banks, while large banks had more losses as banks of first deposit.

1. 1993 Check Fraud Losses

Check fraud losses were rq>orted by 54.0 percent of community banks, and even more frequently by
mid-size banks (94.0 percent) and large banks (88.0 percent). By region, banks in the Northeast were
hit most frequently (83.0 percent), followed by the West (76.0 percent) and the Southeast (69.0
percent).

Amfican BarA^n Attodmdon - 1M4 Ottek Fraud Sunny

237

FIGURE 1: BANKS REPORTING 1993 CHECK
FRAUD LOSSES

Percentage of Banks

120^

100 -!

BO-

60 -•

40-

-i

. /

■

■/

Less Than SCO 500-4.999 S.OOO or More

Bank Assets in Millions of Dollars

Percentage of Banks

100 -f

80 i

Northeast Southeast Central Midwest Southwest West
Region

1994 Cftae* Fraud Survy

238

In total, 162 of the 208 banks (77.9 percent) with check fraud losses provided data on losses. Some
130 gave data as bank of first deposit, and 120 gave dau on losses as the paying bank. The losses
in each category are discussed below.

Ninety-five commiinity banks reported a median of 4 cases per bank and lost a median of SI, 728 per
bank in 1993, 50 mid-size banks reponed a median of 28 cases and a median loss of S37,443 per
bank. Large banks had the worst experience, with a median loss of $387,211 reported by 17 banks
for a median of 210 cases of fraud.

Seventy-three community banks had a median number of 2 &aud cases as banks of first deposit, with
a median loss of 51,000 per bank; and 64 community banks reported 4 cases of fraud as paying
banks, with a median loss of Sl,466 per bank.

Forty-five of the mid-size banks reponed a median of 13 fraud cases as banks of first dq>osit, with
a median loss of 519,500 per bank. In addition, 40 mid-size banks rcporud 20 cases of fraud as
paying banks, with a median loss of S14,500 per bank.

Twehre large banks incurred a median of 162 fraud cases as banks of first deposit, with a median loss
of S374,681 per bank. Also, 16 large banks reported 81 cases of fi:aud as paying banks, with a median
loss of S256,381 per institution.

Hie variation from bank to bank in check fiaud losses was substantial. As banks of first deposit,
community banks incurred losses ranging from S97 to S71,157, and from $90 to S138,842 as paying
banks. Mid-size banks reported losses as banks of first dqiosit of between 5208 and S400,000 per
institution, and as paying banks of between S820 and S310,000. Large banks experienced check fraud
losses in the millions of dollars in 1993. They indicated losses from 51,000 to 563.8 million per
institution as banks of fint deposit, and from 511,270 to S13.7 million as paying banks.

2. Indnstry Losses firom Check Fraud

Industrywide, check fraud was estimated at 1,267,000 cases in 1993, a 135.9 percent increase when
compared with 537,000 cases in 1991. Total losses from these fraud cases was 5815 million, up from
5568 million in 1991 (a 43.5 percent increase), but losses per case declined from 51,058 in 1991
to 5643 in 1993. These results show more frequent instaiKes of check firaud, with each instance
involving less money.

3. Sources of Check Fraud Losses in 1993

Most 1993 check fraud losses came from retail accounts or corporate accounts, as exposed to internal
fraud or other sources. A total of 153 banks reported bsses from retail accounts, and 76 banks
r^orted losses from corporate accounts. In contrast, only 18 banks reported losses involving their
own employees or barik-related personnel, wiiile another 18 banks attributed losses to "other"
sources.

The median dollar loss from retail accounts was 51,674 per bank for community banks, 530,612 for
mid-size banks, and 5310,369 for large banks. The typi^ amount lost from corporate accounts was
51,020 per bank for community banks, 59,081 for mid-size banks, and 5218,800 for large banks.
Althou^ check fraud cases linked to retail accounts outnumbered those linked to corporate accounts,
the dollar amount of each case was generally higher for corporate accounts (51,000 or more each)
than for retail accounc (about 5500 each), as was expected.

Anrnlem Bankers Aatociation „ 1994 Ct»9ds Freud Surwy

239

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1994 Chtek Fnud Survey

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Typical losses due to internal fraud were S2,994 per bank for mid-size banks and 560,513 for large
banks. None of the community banks reported losses due to internal fraud in 1993. Losses stemming
from "other" sources ranged from S3,506 per bank for community banks to $930,416 for large
banks. Mid-size banks reported a typical loss of $31,750 per insotudon.

4. Losses from Govenuncnt Checks

Most banks did not rq>ort check fraud losses from government checks in 1993. Of the 208 banks
with check fraud losses, only 54 banks reported any losses from US. Treasury checks (26.0 percent),
and even fewer rq>oncd any losses from state government checks (32 banks, or 15.4 percent) or local
government checks (14 banks, or 6.7 percent).

Losses due to government checks amounted to a median of 15 percent to 20 percent of fraud losses
for community banks, and 2 percent to 6 percent for mid-size and large banks.

5. Types of Check. Fraud

Check fraud can be perpetrated with forged signatures, forged endorsements, check kiting, or
counterfeit checks. A paying bank and a bank of first deposit face diflFercnt risk exposures. Few survey
partidpants were able to provide detailed informadon about the source of their losses for 1993, such
as losses on-us/non-on-us, kiting versus counterfeiting. These banks were asked about their ability
to provide detailed check firaud information in the fiiturc. Most said they were not sure if they would
be able to provide better information, or would not be able to do so. Less than 35 percent indicated
that they would be able to provide detailed check fraud information in the future. More community
banks are expected to be able to provide information (38.1 percent) than large banks (15.8 percent).
Tracking check fi^ud by the perpetration method would help banks identify weaknesses in their check
processing procedures and would thus assist in the development and implementation of effective fraud
control mechanisms.

6. Organized and Professional Fraud

Organized and professional fraud continued to be major concerns for mid-size and large institutions.
Much more organized fraud was cited by large banks (79.2 percent) and mid-size banks (48.4
percent) than by community banks (7.6 percent). Large banks also attributed a much higher
percent^e (50.0 percent) of check fraud losses to organized or professional efforts than did
community banks (25.0 percent) or mid-size banks (17.0 percent).

7. Losses from Certified Checks, Cashier's Checks, and Teller Checks

Few banks rqwrted losses from returned certified checks, cashier's checks, or teller checks for which
funds must be made available the next day followiog deposit under Official Check Availability
Requirements. More than 95 percent reported no check fraud losses under these categories. The
differences in the rq>orted rates of loss for community banks, mid-size banks, or large banks were not
statistically significant.

8. Fraudulent Cliecks in Various Account A^ Categories

On retail accounts, many banks rq>orted tlut fraudulent checks were deposited in relatively "new
accounts." Indeed, 16.5 percent to 41.9 percent of fraudulent checks, depending on bank size, were
deposited in accounts open less than 30 days.

AAMftan Banker, A-oaatien ^ ^ »»•< "»•«* Frmid Sunrmy

242

However, over one-ihird of fraudulent checks on retail accounts were deposited in accounts open for
more than 1 year. Differences berw'cen community banks and mid-size or large banks were not
statistically significant.

Similar results were found for corporate accounts. While 11.3 percent to 36.4 percent of fraudulent
checks involved corporate accounts open less than 30 days, another 40.2 percent to 64.6 percent
involved corporate accounts open more than 1 year.

In 1993, higher proportions of fraud were linked to banks' esublished accounts (retail accounts, 43.9
percent; corporate accounts, 40.2 percent) than in 1991.

9. Did Regulation CC Increase Exposure to Check Fraud Loss?

Opinions were mixed about whether exposure to check fraud losses increased due to the
implementition of Regulation CC. More of the mid-size and large banks saw problems with
Reguladon CC than community banks. While 67.6 percent of mid-size banks and 54.5 percent of
large banks said that they faced significantly or somewhat more exposure to losses because of
Regulation CC, only 28.1 percent of community banks rq>orted more exposure to losses. Instead,
more community banks reported either no change (40.7 percent) or no basis on which to judge
(312 percent). One of the concerns voiced by survey panicq>ants related to notification of problems
and returned items. The conflict was evident from written comments. Bankers said that they needed
to be notified sooner and that there were problems with banks that did not notify. Others
commented that they received an item before notification or on the same day. The need for ABA to
communicate with regulators about these problems was apparent Some of the proposed
improvements included better enforcement of notification standards and longer hold times.

10. £]q>ected Fraud Loss Exposure in the Future

Opinions were also mixed about whether future check fraud losses would increase, decrease, or stay
the same. This question was posed widi respca to three categories: (1) counterfeits, (2) organized
attempts, and (3) other conditions.

Many banks think o^osure to counterfeits will increase in the next 12 months, and they expea an
increase due to organized attempts. Fewer banks expea losses to increase because of "other"
conditions. Large banks in particular foresee an increase in exposure to counterfeits and organized
attenqjts. For instance, 73.0 percent of large banks and only 25.0 percent of community banks expea
an increase in exposure to counterfeits. Similar expectations were found for organized attempts.

F. FRAUD INSURANCE AND OTHER PRECAUTIONS

1. Insurance Coverage Against Fraudulent Checks Deposited

Community banks (73.8 percent) were more likely to carry insurance coverage against losses from
fraudulent checks deposited (74 percent) than mid-size banks (62.7 percent) or large banks (51.9
percent). The difference between community banks and large banks was statistically significant. The
risk potential for check fraud was heavily concentrated at mid-size and large banks, where insurance
coverage and fraud prevention must be balanced to be cost effective. Most institutions included the
coverage against firaudulent checks under a Financial Institution Bond (FIB), carried either by the
bank or the holding company.

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Survey results suggested that banks ultimately bore the losses from check fraud. In most cases, loss
totals were less than insurance deductible amounts.

2. Bank Functional Areas Addressing Check Fraud

Most banks have already allocated resources to internal fiinctions in an attempt to reduce check fraud.
Resources were allocated primarily to operations, followed by audit/investigation functions, systems,
and, to a lesser extent, produa management Large banks were much more likely to provide funding
to internal functions for check fraud prevendon than community banks. For example, 75.8 percent
of large banks allocated resources to operations, compared with half the proportion (39.7 percent)
of community banks. Audit/lnvescigadon efforts to control check fraud were supported by 69.7
percent of large banks versus 23.6 percent of community banks. Many community banks indicated
that the most effective method of fraud control was customer recognition. The relative few fraud
cases reported by community banks suggest that adequau attendon and resources had been devoted
to the check fraud issue at these banks.

3. Positive Pay Service

Most mid-size and community banks had not adopted a positive pay service for their corporate
customers. Among mid-size banks, 83.1 percent were not actively marketing this service and had no
plans to do so in the next 12 months. Among conununity banks, 96.0 percent did not market a
positive pay service nor planned to do so. Large banks were the excepdon. More than half (54.5
percent) of large banks already marketed a positive pay service. At these banks, an appreciable
proportion (30.3 percent) of corporate customers migrated from standard disbursement-
reconcilement service to a positive pay service in the past 12 months.

4. Methods Used to Educate Bank Customers

Banks employed various methods to educate their corporate customers about their responsibilides for
preventing check fraud. Statement stuffets were the primary medium of educadon, regardless of bank
size. Community banks were most active; almost two in three (65.3 percent) used statement sniffers,
as did one in two mid-size banks (53.6 percent) and large banks (54.2 percent). Mid-size (35.7
percent) and large (41.7 percent) banks also used semiiun or workshops. Fewer banks used bulletins,
newsleners, or other media to communicate with dieir corporate customers on check fraud issues.

5. Do Corporate Customers Understand Their Scsponsibilities for Preventing Check Fraud?

The need for customer educadon became obvious because only about half of the banks believed that
their corporate customers understood some or all of their responabilides for the prevendon of check
fraud. Less than 1 in 5 banks believed that coiporaQons had a thorough understanding of their
responsibilides. Indeed, many banks asserted that corporations were cither unaware of these
responsibilities or in denial, i.e., they did not believe that they had any responsibilities to prevent
check fraud. This pessimistic assessment was gjven by banks of all sizes.

6. Amounts Devoted to Check Fraud Prevention, Detection, Investigation, and Prosecution
in 1993

The amount of money that banks devoted to combat check fraud in 1993 varied as a direct function
of bank asset size. Community banks typically spent less than S10,000 and mid-size banks between
S10,000 and S250,000 for check fraud prevention, detection, investigation, and prosecution.

Anmiean BaniMn Attoeution .- 1904 Chtek Fnud Sufwy

247

The majority of large banks surveyed (57.2 percent) devoted under $250,000 to the check fraud
issue. About 1 in 10 (14.3 percent) spent between 5250,000 and SI million, and a large proportion
(28.6 percent) spent more than SI million in 1993 on check fraud and related expenses (not
including actual losses).

7. Tracking tiie Results of Check Fraud Prevention

Most banks did not measure their check fraud prevention results, although this diifen by bank size.
Thus, 85.6 percent of community banks and 80.3 percent of mid-size banks do not track these
results, nor did they plan to do so in the next 12 months. In contrast, over half of the large banks
(54.6 percent) currently tracked or planned to track their check fraud prevention results.

The benefits of tracking were amply demonstrated by the data fiimished by a small group of survey
participants. Nine large banks identified a median number, 155 cases, of check fraud attempts in 1993
where no loss was sustained, but with a potential median loss of $1,162,461. The attempts reported
by large banks had a range of potential losses from $68,000 to $6,340,000 per bank. Sixteen
community banks found a median of 8 cases of potential firaud, which could have cost $2,350 per
bank. Eight mid-size banks tracked their prevention results and identified a median of 34 cases of
potential check fraud, with a potential cost to each bank of $56,500.

8. Approaches Taken to Prevent Check Fraud Losses

Banks took many actions to prevent check fraud loss. Action cited most frequently was employee
training fr>r front-line personnel, managers, and/or backroom personnel. Odier popular initiatives
included account screening, signature veiificadon, and deposit review. Many banks verified
quesdonable or irregular items such as signatures and check stock, or phoned ciistomers to verify
large dollar amounts. Fewer banks converted to electronic payments, such as debit cards, or used
applications software to control check fraud. Even fewer considered Electronic Check Presentment
or image proccsang as a means of preventing check fraud.

Only a small proportion of survey participants required corporate customen to use posidve pay service
or non-laser-piinted checks, or specified check stock security features for their corporate customers.
Large banks were more likely than smaller banks to take these steps.

Indeed, large banks and mid-sze banks in^>!emented several approaches to reduce their exposure to
losses. For example, most banks conducted employee training, or used software ^plicadons,
verificadon/callbacks, and Electronic Check Presentment to control fiaud. Their efforts paid off,
according to the banks that monitored firaud prevention outcomes.

9. What Actions Arc Most Important in Addressing the Issue of Check Fraud?

Bankers agreed that employee training was by £ar the most important aspect in addressing the check
fraud issue. Bankers dted next in importance customer educadon about bank fraud, and
communicating with regulators about check firaud problems/availability schedules. They ranked next
a check fraud prevendon procedure manual, followed by communicadon with peers regarding check
fraud in seminars/workshops/confereiKes. Hnally, bankers dted audits, standardized procedures to
track and monitcsr check fraud losses, and the confidential exchange and compiladon of loss data.
Survey particq>ants ranked conversion to Electronic Check Presentment low in priority.

Am0ric»n BmAm* A««oe»tion ^g »»« "»«* ^'^ Surv»,

248

G. ABA ASSISTANCE

Conununicadon with regulators is the most valuable service ABA can provide to banks as they cope
with check fraud problems and availability schedules. This assistance appealed to 54.0 percent of
conununity banks, 64.9 percent of mid-size banks, and 85.0 percent of large banks. This difference
was statisdcally significant because larger banks want this assistance more than community banks. A
check fraud prevention procedure manual was requested by over half of all banks.

Community banks (42.0 percent) needed seminan/worksbops/conferences signiiicandy less than did
mid-size banks (64.9 percent) and large banks (60.0 percent). Community banks and mid-size/largc
banks differed significantly on two other services. Fewer community banks wanted ABA to provide
confidential exchange and compiladoD of loss data (32.0 percent) than did mid-size banks (62.2
percent) and large banks (60.0 percent). Also, only 32.0 percent of community banks wanted ABA
to establish standardized procedures to track and monitor losses, compared to 56.8 percent of mid-
size banks and 65.0 percent of large banks.

Community banks wanted ABA to help with employee training (52.0 percent). However, this service
appealed to only 37.8 percent of mid-size banks and 30.0 percent of large banks, where such trainii^
might already be in place.

About 4 out of 10 banks of all sizes requested assistance in educating bank customen. More large
banks (30.0 percent) wanted ABA to help with conversion to Electronic Check Presentment than did
conununity banks (6.0 percent).

Few banks requested help from ABA with audits: only 6.0 percent of community banks, 16^ percent
of mid-size banks, and 15.0 percent of large banks.

Siuvey parddpants were asked to describe the acdons they have taken and the soludons they have
found for check fraud prevendon. Almost 90 comments discussed methods used to avoid or reduce
loss:

(1) Initial and periodic/continuous training to increase "teller awareness;"

(2) A muld-tier system of check review processing, such as different processes for different amounts;

(3) Signature verifrcadon by methods frx>m signature fries to fax/on-line verificadon;

(4) Conservative procedures for opening new accounts, for example, requiring references and/or
valid state IDs, conducting credit bureau checks, sending letters to verify addresses, using the
CHEX and NCPS systems; and

(5) Plans to stan/promote debit card programs, applicadons software, and kiting rq>orts.

Twenty-seven banks also made general comments on controlling check fraud. Suggestions included
a method to control unauthorized paper drafts and ATM fraud, new regulations on check printing
vendors and the hardware/software used to print laser checks, extending the bold time on local
checks, and methods to control aew account fraud. Two banks requested a uniform statistical
reporting system. Others commented that they do not ke^ records on the items in the survey.
Several banks stressed the importance of vigorous prosecution, but the problem of collecting
restitution was also dted. One banker indicated the benefit of training front-line people as the "best
preventive measure. '

Amviean Bankan AtaodaVon .q 1994 Chaek Fraud Sunay

249

IV. RECOMMENDATIONS

The following recommendations are provided for consideration:

1 . Distribute infonnation to all ABA members on the positive actions taken by banks to reduce
check fraud.

2. Communicate with regulators about check fraud problems identified by $urve>' participants.
Provide the member services most requested, for example, a check fraud prevention procedure
manual.

3. Target the services to banks by asset size where differences exist, for example, employee training
for community banks, seminars/workshops/conferenccs for mid-size and large banks.

4. Promote standardized check fraud tracking procedures. Establish a database to monitor losses
from check fraud and compare these losses to insurance coverage and recoveries and to total
check volume. This service appealed in particular to mid- size and large banks.

5. For future surveys on check fraud, design a simpler form for communitv- banks to complete
because many community banks do not keep the detailed dau sought, nor do they expect to
be able to provide detailed information in the future.

250

Attachment 2

1995 BANK CARD INDUSTRY SURVEY REPORT

251

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Attachment .^

ABA BANK SECURITY

Fraud Prevention

EXECUTIVE SUMMARY

New SAR Released

Federal regulators have
finalized the new Suspicious
Activity Report, which will
replace the old Criminal Referral
Form system.

Banks only have to file the
new form with one agency —
Treasury's Financial Crimes
Enforcement Net\\'ork
(FinCEN). Supporting
documentation is retained by
the bank and must be kept only
five years instead of 10.
Thresholds for mandatory
reporting have been increased.
The rule that implements
the new form is effective April 1 .
Regulators will send banks
software to put the new system
in place.

Watch Out for These
Scams

♦ Federal regulators have
learned of a scheme whereby
banks are receiving fraudulent
certified banker's checks and
notes and controller's
warrants of up to a million
dollars. The checks arc
supposedly payable at United
States Post Offices, the

Treasury Department and the
Office of the Comptroller of
the Currency. A few banks
have suffered substantial
losses.

♦ The Securities and Exchange
Commission has put out the
word on an investment scam
that has cost some insurance
companies millions of dollars.
The elaborate scheme was
started by several fraudulent
brokerage companies which
claim to be able to buy and
sell Treasury bills to generate
profits far in excess of interest
rates. The companies then
misappropriate the fiinds in
several ways including check
kiting. Regulators are
concerned that the banking
industry may be the next
target.

Travel Rule Update

Comptroller of the Currency
Eugene Ludwig has informed
banks that they do not have to
comply with the April 1 effective
date for the new funds transfer
travel rule until changes in the
Fedwire are completed.

Temporary Rule on CTR
Exemptions

FinCEN announced at a
recent meeting that it will
publish a temporary rule that
will allow banks to exempt close
to three million CTRs from
being reported to the IRS. The
agency also said it will propose a
rule to exempt another six
million.

Debit Card Study

Events over the last several
years have alerted banks to the
threat of massive debit card
counterfeit fi^ud.

Recognizing the seriousness
of this exp>osure, executives of
leading regional networks asked
the consulting firm Card Alert
Services, Inc. (CAS) to perform
a nationwide srjdy of the
problem. This study defines and
quantifies the problem and
recommends an appropriate
course of action. CAS completed
the study in early 1995 and
published a report entided
"Debit Card Fraud: A National
Perspective." ABA has published
a form of that report.

Volume 3/hsue I

January 1996

255

ABA BANK SECURITY

'Fraud Prevention

^i^

HAXKHKS
ASSOllAI ION

January 1996
Volume 3/lsstte 1

News Brie&
Streamlmed

SARRcpon 1

Timely SAR

Semtear 1

Alert: iFrauduteot

Certified Checks 3

ABA Tadt force m

Address Payment Risk . .7
Electronic Stq>eiiiis^way:

Traffic Rides .... 7

Mciiukoff at Foretjgit

Conferetice 9

Special In-Deptfa T^eature
Managing DeUt Card

Risk (part 1) J

Debit Card Fraud

Scenarios £

Washington Report
BSAAdvi$cH7 KkOfsp,
new SAR & more ^. . .A

Security Prcriuet
Roundup .10

New Suspicious Activity Report
Streamlines Reporting System

Federal regulator finalized
and released the long-awaited
new Suspicious Activit>' Report
in February.

The SAR replaces the filing
of Criminal Referral Forms and
streamlines die reporting
system. The rule that
implements the new form is
effective April 1, and all banks
will receive software to prepare
SARs on computer and file them
by magnetic media.

The new system combines
FinCEN's suspicious activity
reporting with other agencies'
criminal referral processes.
Previously banks could submit
Currency Transaction Reports
along with CRFs.

Banks only have to file
SARs with FinCEN instead of
multiple agencies. All
supporting documentation is
retained by the institution

Continued en page 5

Timely WorkAop:

How to Complete New
Suspicious Activity Report

In three different does, ABA
will conduct a four- hour
workshop which will take you
step-by-step through the new
Suspicious Acti\it>' Report, tell
you what avK crimes are now
covered, as well as who must
report them and when!

Banks are still required to
file reports of known or
suspected criminal and
suspicious activities to the
government.

The new reporting
mechanism will be a Suspicious
Activity Report (SAR) \(^ch
replaces the filing of Criminal
Referral Forms (CRFs).

The rule goes into efTea
April 1, 1996 and all banks will
receive software in order to
prepare an SAR on a computer
and file it by magnetic media.

This new system simply
requires one filing with

Ccntintud en page 11

American Bankers Association

256

ABA

BANK SPr. URITY & FRAUD PREVENTION

Building an Effective Debit Card Risk
Management Program

by Douglas D. Andereon, chairman, and Richard H. Urban,
president of Card Alert Services

Editor's Note:

Over the past several years, events awakened the banking
industry to the threat of massive debit card counterfeit fraud.
Recognizing the seriousness of this exposure, executives of leading
regional networks (Cash Station, CU CO-OP, HONOR, MAC,
MOST, NYCE, PULSE, STAR, and TYME) asked Card Alert
Services, Inc. (CAS) in late 1994 to perform a nationwide study of
the problem. This study would define and quantify the problem,
gather the insights of bankers around the country, and recommend
an appropnate course of action. CAS completed this study m early
1995 and published a report entided "Debit Card Fraud: A
National Perspective." ABA has published a condensed form of
that report in its RctaU DeUvery Strategies publication. The
following article contains some of the information and
recommendations made in chapter four, which covers how to
create an effective debit card risk management program.

'ATMs are dead'

This highly sensational but
misguided statement was made
in November 1993 by a
disguised personal computer
desperado before the cameras of
an American Journal video
report.

The setting was an
international hackers'
symposium in Amsterdam where
among the lessons PC
aficionados were taught was how
to defraud automated teller
machines (ATMs) via electronic
intrusion and intervention.

The statement was made six
months after the highly
publicized Buckland Hills,
Conn., caper in which two
criminals defrauded hundreds of
bank customers using a fake
ATM.

The symposium took place
around the time that "shoulder-
surfing," was beginning to take
off (see the October and

November 1994 issues of Batik
Security and Fraud Prevention).
Because of these and other
events, bankers were becoming
increasingly aware of the risk the
industry faces.

They also showed the
industry that while its personal
identification number/data
encryption standard (PIN/DES)
has constituted a strong first line
of defense, it has some limits.

A recent scam against MCI
proved fiirther that more
sophisticated fraudulent
methods, including insider help,
can be employed to commit
major crimes against
corporations.

In that case, a PC hacker
from Majorca, Spain, along with
an MCI insider in North
Carolina, obtained in a few
weeks 160,000 calling card
numbers and personal
identification numbers (PINs).

The cards were then
"trafficked" on the street.

resulting in estimated losses to
MCI, AT&T, and Spnnt of
$150 million. It is possible that
such a major scam can happen in
the banking industry.

To guard against this
possibility, bankers and the
banking industry in general need
to take a cohesive approach that
includes action by both
individual banks and by the
industry in general.

The debit card problem

Most U.S. banks define
debit card fi^ud in terms of
traditional fi^ud — lost or stolen
cards and firaud perpetrated by
families, fticnds and neighbors.
The evolution of debit card
counterfeiting over the past two
years, however, has transformed
debit card firaud from a low-level
"nuisance" cost of doing
business to a potentially serious
industry problem, with
significant consequences in store
for the coming years.

The problem includes on-
line fiaud, the misuse of
automated teller machine cards
(ATMs) or Visa/MasterCard
debit cards with PINs to obtain
cash at ATM and point-of-sale
(POS) cash-back locations and
off-line fraud.

The latter refers to
fi^udulent purchases with
Visa/MasterCard debit cards at
locations not able to facilitate
PIN identification.

Cardholders now can use
debit cards in millions of
merchant locations worldwide
where no capability exists to

American Bankers Association

January 1996

257

ABA BANK SECURITY 8c. FRAUD PREVENTION

identify die cardholder
electronically and where, in
many cases, transactions arc not
authorized.

While many of these point-
of-sale terminals arc technically
"on-line" to an authorization
system, no merchants except
those ofTcring cash back on a
debit card, ask for and validate
customers' PINs.

So far, counterfeit debit card
fraud activity has been isolated
to certain geographic markets.

However, these first stage
counterfeit schemes will likely
spread to other geographic
markets.

Almost all counterfeit
activity ciKountered to date has
been relatively "low tech" in
nature, also.

But as more and more fraud
management defenses such as
truncation (eliminating a
portion of the card number on
customer receipts) are
constructed, the criminals
pcipctiating counterfeit fi-aud

will be forced to move up the
technology curve to obtain the
necessary information for
counterfeiting cards.

The result will be more
sophisticated fraud schemes and
a much higher exposure for the
financial services industry.

Developing risk
management programs

To address this growing risk
ef!i:ctively, industry action in
two areas is needed.

First, individual banks need
to take specific actions to shore
up traditional defenses against
fiaud.

Second, the industry as a
whole needs to take initial steps
to build a common defense
against counterfeit fraud.

In the February issue of
ABA Bank Security &■ Fraud
Prevention the authors \\ill
describe several ways in which
debit card security is being
compromised in banks and at
POS locations.

And, they will recommend »
number of safeguards that
banks can install to reduce their
exposure to losses irom debit
card fraud and counterfeiting.

Editor's Postscript

The industry has taken a
significant step forward toward
building a common defense
against counterfeit fraud.
Through Card Alert Services,
Inc., an early detection and
control service has been developed
and is scheduled to be
implemented by early second
quarur, 1996.

At the time of this writing,
more than 40 major banks
throughout ti>c country, with
approximately 60 million cards
outstanding (40% of the total
U.S. debit card base) have
committed to participate. To
learn more about this project,
contaa Card Alert Servius at
(709)486-1122.0

Ones That Get Away

You don't want these fish to
bite.

We want to hear from
you. . .

The Oregon Bankers
Association observed recently
that numerous financial

Got an idea for

institutions in the past year have
found evidence of people using
hooks and fishing line to
attempt to lift bags placed in
night-deposit boxes.

Contaa your bank's service c^^te

a news story or

article?
Call or e-mail

rciprescntative to see if your
night deposit can withstand
fishing.

If it can't, ask about devices
that can be added, says Doug
Kidder of the OBA. (reprinted
with permission of ABA
BankersNews)

■1

your editor.

Hunter Moss
(202)663-5071
INTERNET:
hmos$@aba.com

January 1996

American Bankers Association

258

ABA BANK SECURITY & FRAUD PREVENTION

ATM Security
Banker Resource Kit

3i^3

Protect your ATM customers
...as you protect your bank!

The increase in ATM crime continues to threaten
your customers' safety... and your bank's security.

But you can fight back with the useful set of tools
included in this new Banker Resource Kit from ABA's
Center for Banking Information (CBI).

You'll get

♦ Articles on ATM security from recent periodicals
gathered from CBI's exhaustive database

♦ A list of Customer Safety Tips to distribute to
your customers or present to community groups

♦ Suggested guidelines for ATM security

♦ A review of existing case law and current
legislation from ABA's legal staff

<> A sample public relations packet to help you
respond to media inquiries about your ATM safety
program

♦ Information on ATM networks and on programs
conducted by various state bankers associations

♦ Information on related ABA products and
programs You can get this versatile, cost effective,
and immediately useful information only from ABA.

Order your ATM
Security Banker
Resource Kit today!

ATM Security: A
Banker Resource Kit -
$55 ABA member.

$75 Non-member.

For more information
or to order: Call ABA
toll free at 1-800-338-
0626, ext. 5384 or
(202) 663-5384.

Internet address:
hmoss@ABA.com

American Bankers Association

January 1996

259

ABA BANK SECURITY 8c FRAUD PREVENTION

'SAR' from page 1
instead of filing all
documents with the entities
that will receive the SAR.
The final rule also reduces
the time banks must keep
SAR information to five years
fi-om the previously required
10 years.

Increased threshold

A major change in filing
requirements is the increased
threshold for n-<andatory
reporting. They now are as
follows:

♦ S5,000 for violations where a
suspect can be identified.

♦ $25,000 for violations
without a suspect.

♦ 55,000 for suspected money
laundering and Bank Secrecy
Act violations.

Banks still must file SARs
for any suspected insider abuse.

Look for John Byrne's column
in the next issue for more
information and analysis. O

Fraudulent Certified Bankers
Checks Have Caused Major Losses

Federal banking regulators
have been alerted chat banks arc
receiving fi^udulent certified
banker's checks and notes, and
controller's warrants supposedh-
payable at United Sates Post
Offices, the Treasury
Department and the Office of
the Comptroller of the Currency
(OCC).

The checks are without
financial value. In many cases
the checks are written for
hundreds of thousands of dollars
and in several reported cases,
millions of dollars.

A few banks have suffered
substantial losses by accepting
the instruments.

From the bankers
perspective

Daniel P. Stipano, director of
Enforcement & Compliance,
OCC offers this advice:

Who within a bank should
be looking for these checks.'

Anyone dealing with
certified checks and notes or
controller's warrants, including
tellers and payments processing
personnel.

What can bank employees do
if they see such checks.'

^ Contact local law enforcement
such as local police or the
regional FBI office.

♦ Contact federal law
enforcement officials.

^ File a Criminal Referral Form
or the new Suspicious Acbvity
Report when it becomes
available.

^ Send a fax to OCC office at
(202) 874-5301. O

Banks Next Tarncts of Investment Scnui?

The Securities and Exchznge
Commission recendy alencd chc
banking industry of a scam now
affecting the insurance industry
that has the potential to spread to
banking.

Fake Treasory bill transactions

In several cases now being
pursued by law enforcement,
brokerage companies bilked
inx-cstors out of tens of millions of
dollars by claiming they could buy
and sell Treasury bills in such a

way as to generate profits &r in
excess of interest rates.

To lull investors into believing
the investments were safe, the
brokerage companies used false
confinnadons and communicadons
from stock brokers.

The money received for the
fraudulent investments was then
misappropriated in a number of
ways including check kiting pay-
off and real estate purchases.

The scheme is fairly elaborate
so cracking it down has taken
several years.

Money moved to foreign
accoontf

In the mean time, even though
the SEC has begun prosecution of
suspects (SEC v. Robert C. Wilson,
Gary F. Long, Samuel L. Boyd and
Debenture Guaranty Corp.,
U.S.D.C., Colorado), some of the
money has been moved to foreign
accounts.

For further information,
contaa SEC's Office of Consumer
Affairs (202) 942-7040. O

January 1996

American Bankers Association

260

ABA BANK SECURITY & FRAU DPR E V E N T I O N

yYashin£fton
t\eport by

John J. Byrne

Snowbound —
But We Can't
Sleep In

Washington, D.C., has finally
dug out of the worst snowstorm
in years. And while we were
getting all that snow, politicians,
not to be outdone in the
headline department, were
engaged in the worst budget
battle in years.

The year has gotten off to an
interesting start, and we must ask
ourselves — what's in store in
1996 for security officers.' As
always, there is plenty going on
to occupy our time. However, we
should prepare ourselves for
change. The following is a quick
update on a few items on the
front burner.

BSA Advisory Group

Treasury's Bank Secrecy Act
Advisory Group met Dec. 8,
1995, for the sixth time.
Comptroller of the Currency
Eugene Ludwig welcomed
committee members with
remarks on the value of the
regulatory reduction being
finalized by FinCEN.

Members then were briefed
on a series of regulatory changes
widely discussed by the industry
in the past year. Several changes

will directly result in trcnKiidous
cost savings and incrcascil
efficiency for the banking
industry.

Delay of funds transfer
travel rule: Many banks voiced
concerns about the April 1 ,
1996, effective date for the new
funds transfer travel rule.

That rule would have
required banks to incur new costs
on April 1 AND additional new
costs when the Fedwire changes
its format (expcaed in 1997).

The New York Clearinghouse
estimated that the costs for most
banks would range from S2
million to $3 million to comply.
FinCEN agreed that these costs
are prohibitive and announced to
the BSA group that banks will
not have to comply with all
aspects of the travel rule until the
changes to Fedwire were
complete. As of this writing, we
are awaiting an official
annouiKcment from FinCEN on
the matter.

CTR exemption policy:

In the ABA-supported 1994
Money Laundering Suppression
Act, Congress required FinCEN
to create a new system for
exempting currency transaction
reports (CTRs).

Simply put, the new system
would allow an institution to
cease filing CTRs on large dollar
transaction filen such as major
retailers.

In addition, FinCEN was to
create a system by which banks
could permanently exempt
entities that are of no interest to
law enforcement.

ABA put together a working
group of bankers who met in
Washington, D.C., in August to
discuss various options with
FinCEN.

At tlic BSA Ad\isory Group
meeting, FinCEN announced it
wouKl publiiih a temporary rule,
ctTcctive immediately, that would
allow banks to exempt close to
three million CTRs from being
reported to the IRS.

FinCEN also said a notice of
proposed rulemaking would be
published that would eliminate
another six million CTRs. Look
for details soon on those events.

The industry is clearly getting
a major reprieve from a rather
burdensome reporting
regulation.

TheNewSAR

Another change in BSA-
related re[x>rting has just been
released (see related story on
p. 1 ): the new Suspicious Activity
Report.

This form, an improvement
to the 10 -year- old Criminal
Referral Form, will allow banks
to file reports on susptected
violations of federal criminal law
to one agency — FinCEN.

The change will save the
industry at least half a million
dollars, as well as improve all
aspects of the repnsrting system.

ABA has long sought a
method such as this one — as
opposed to the ciirrcnt
requirement that six different
agencies receive fonns.

International efforts:

In addition to our extensive
domestic efforts to deter money
laundering, ABA also is
committed to helping the U.S.
govermnent work with foreign
nations to crafr anti-money
laundering laws and regulations.

I have been fortunate to have
had the opportunity to educate
bankers in other countries on
methods by which we train our

American Bankers Association

January 1996

261

ABA BANK SECURITY 8c FRAUD PREVENTION

bankers to detect anil rcivm
fratiJ ami other law violation!!.

Most recently, ABA was
asked to attend a Financial Action
Task Force (FATF) forum on
financial services in Paris in late
January.

The forum was developed to
give the intenutional private
sector a chance to share views on
money laundering vulnerabilities
and countermeasures.

ABA was represented by
Boris Mclnikoff, senior vice
president. First Wachovia Corp.,
and chairman of ABA's Money
Laundering Task Force.

He presented ABA's views on
the long-standing FATF proposals
and other issues. A summary c£
those points is in the accompanying
news story on p. 9. O

ABA Task Force Will Address
Payment Risk

ABA has formed a Payments
System Task Force to address all
elements of payments systems
and technologies, including
security issues.

The task force will consist
of executives of banks of all
sizes.

The first meeting will be
held on February 15 and 16
in Washington, D.C.

Threats from Cybercash

As part of that meeting.
Treasury's Financial Crimes
Enforcement Network and the
U.S. Secret Service will present
concerns about the security and

money laundering threats that
cybercash may present to the
nation.

The task force is being
chaired by Murray D. Lull,
president and CEO of Smith
County State Bank and Trust
Co., Smith Center, Kan.

Specific
Recommendations

The task force's mission is to
come up with specific policy
recommendations following a
series of meetings.

ABA will keep readers
apprised of what occurs. O

Superhi£fhway Traffic Rules

As banks scramble to deliver
the electronic services demanded
by millions more customers each
year, risk and security managers
must be involved in the
development of those products.

"It is an on-line world," said
Jonathan Palmer, chief retail
banking and technology
executive, Bamett Banks Inc.,
Jacksonville, Fla.

When his bank introduced
electronic banking, it recorded
200,000 transactions in 1993.
Last year, the number rose to
more than 50 milUon.

New 'hacker' risk

However, iiuiovations such
as personal-computer banking
and smart cards open up whole
new areas of risk fi-om hackers,
computer viruses and insider
theft.

Too often. Palmer said,
products are developed and
marketed before bank risk
managers and security
professionals can look at them to
avoid pit&lls.

Caterina Lauti, product line
manager, Fidelity' and De[>osit
Co. of Maryland, in Baltimore,
said: "More than ever in product
development, it's most
important that the team comes
along together, including those
looking at securit)- risks."

Factors to consider

Consider these risk- related
factors in developing electronic
banking products, advises
Stephen Katz, chief information
security officer, CitiBank, N.Y.:

♦ How do you verify who can
use the product?

^ How do you control the level
and types of services available
to each individual customer

♦ How do you ensure the
privacy of the information?

♦ How does the customer
"sign," or electronically
authorize, a given transactioa'

^ If something unauthorized
happens, how quickly can the
bank become aware of that
event and take steps to
minimize loss?
These risk experts spoke at

ABA's National Security, Audit

and Risk Management

ConfereiKe last month.

(reprinted by permission of ABA

BankersNews)

Look for timely coverage in

the February issue of key

security and risk issues presented

at the Security Conference. O

January 1996

American Bankers Association

262

ABA BAN K SECURITY &: F R A U D PREVENTION

Debit Card Fraud Scenarios Hi^hli^ht
Where Banks Can Fortify Defenses

The following scenarios are
composites of a number of cases
that have aJready occurred. They
are not intended to describe any
specific case. They are presented
to illustrate the levels of
compromise, how criminals
adapt their techniques, and how
the risk escalates.

In these scenarios, the fraud
evolves in a market where about
50 percent of the debit cards are
vulnerable to shoulder-surfing
(i.e. usable, but fraudulent cards
can be produced from receipts).
The terms used in describing
this "evolution of a fraud"
include:

♦ Point of compromise — the
ATM or POS terminal where
the access information (card
number and PIN) are
compromised

♦ Point of fraud — the ATM or
POS terminal where the
fraudulent card is used to
withdraw cash or purchase
merchandise

Level 1 compromise

An individual standing near
the terminal observes the entry
of a customer's PIN and
recovers the discarded receipt.

The criminal uses the receipt
information to encode a card
and then defrauds the
customer's account. The typical
point of cotnpromise is an ATM
or POS terminal. The typical
point of fraud is an ATM
without a camera. While 50
percent of the cards are at risk,
cardholders are wary of someone
observing them entering their
PINs and, therefore, are less

likely to discard the receipts. A
typical yield to a criminal using
this level would be three to
seven fiaudulent cards per 100
transactions; the potential —
tens to hundreds of cards.

Level 2 compromise

A criminal, in a nearby
parked van, uses a pair of field
glasses or a video camera with a
zoom lens to observe the entry
of the PIN and recover a
customer's discarded receipt.

The criminal uses the receipt
information to encode a card
and then defraud oistomers'
accounts. Again, the typical
point of compromise is an ATM
or POS terminal, and the typical
point of fraud is an ATM
without a camera. While the
same 50 percent of cards are at
risk, cardholders do not realize
they are being observed entering
their PINs and are more likely to
discard receipts. Thus, the yield
goes up — to 8 to 15 fraudulent
cards per 100 transactions; the
potential — hundreds to
thousands of cards.

Level 3 compromise

A criminal uses a video
camera to observe the entry of
customers' PINs and colludes
with a store clerk to gain access
to the store's copy of customer
receipts.

The criminal uses the receipt
information to encode cards and
defraud the customers' accounts.
The typical point of compromise is
a POS terminal. The typical
point of fraud is an ATM
without a camera. While half of
the cards are at risk, the camera

is likely in a frxed position and
will not be able to "see" every
PIN entry. The yield to the
crook may be 16 to 35
fraudulent cards per 100; the
potential — thousands to tens of
thousands of cards.

Level 4 compromise

A criminal uses a video
camera to observe the entry of
customers' PINs, and the
magnetic stripe data is skimmed
from a tapped phone line or a
secondary collection device. The
criminal uses the skimmed
information to encode cards and
defraud customers' accounts.

The typical point of
compromise is a POS terminal.
The typical point of fraud is an
ATM without a camera. While
all of the cards are exptosed to
risk, the camera will not be able
to record every PIN. The yield
to the criminal may be 60 to 70
fiaudulent cards per 100
transactions; the potential —
tens to hundreds of thousands of
cards.

Level 5 compromise
The criminal invades a
terminal or system node with
invasive program code (insider)
or uses a fake terminal (outsider)
to compromise both PIN and
card information. Most likely the
points of compromise are POS
terminals, ATM or POS terminal
processors, networks or switches.

The cards are 100 percent at
risk and the yield is 100
percent; the potential —
depending upon the point of
compromise, millions of cards!

American Bankers Association

January 1996

263

ABA BANK SECURITY Be FRAUD PREVENTION

ABA

AMI KK AN

HWKl.KS

ASSOClAi U)\

NEWS

Melnikoff Represents ABA at Forei^fn Conference

The chairman of ABA's
Money Laundering Task Force
responded to a request by
foreign financial entities to
comment on what the U.S. faces
and what U.S. bankers are doing
to combat money laundering.

Boris Melnikoff, senior vice
president, First Wachovia Corp.,
represented ABA and the U.S.
banking industry at a Financial
Action Task Force forum in
Paris in January.

Among issues he discussed
were:

ABA'S views on FATF
recommendations

Many of FATF's
recommendations, including
passing a law to criminalize
laundering, suspicious activity
reporting and due diligence
procedures, have been
implemented in the U.S. for
many years.

Melnikoff commented that
ABA remains committed to a
need for policies requiring non-
banking entities, as well as
banks, to keep records and
identify certain transactions.

Need to Streamline
Routine Transactions

He also pointed out that
while the U.S. banking industry
has an excellent record of solid
account -opening procedures (as
outlined in FATF
recommendations 9 to 14),

which arc stressed in employee
training programs, it also
recognizes the need to
streamline and, in some cases
eliminate routine transactions.

-. . . But the U.S.
government and the Congress
have already begun that process.

Therefore, while we support
having several of the U.S. Bank
Secrecy Act laws being placed
on all financial institutions
throughout the world, changes
and modification to those laws
are also necessary."

FATF recommendations 15
to 29, which address suspicious
transaction reporting and Know
Your Customer policies, are also
important procedures, Melnikoff
stressed.

"But we would stress that
financial institutions MUST be
proteaed fi'om civil AND
criminal liability for fulfilling
their responsibilities to detect
and report unusual or
potentially criminal violations as
well as closing accounts on
individuals who have acted
contrary to law and regulabon."

Money Laundering
Trends Changes

One of the unintended
effects of renewed banker
\-igilance in the U.S. is that the
method of laundering has
shifted from traditional financial
institutions to other entities.

For example, attention in
the past several years has turned

to fraudulent postal money
orders and letten of credit,
phony import/export businesses
and other methods of
laundering through international
trade.

These new trends can be
discovered and addressed by
continued private/public sector
cooperation, which is occuning
in the U.S., Melnikoff pointed
out.

"ABA recommends that
various banker training forums
include these new approaches to
money laundering," he said.

Emerging Technologies

With the advent of smart
cards and cyberspace financial
services, both the government
and the banking industry must
be prepared to address new
money laundering issues,
MelnikofT suggested.

He recommended an
international FATF forum
dedicated solely to this issue.

Continuing
Communications

Melnikoff also suggested
that the working relationship
between government and the
private industry in the U.S. has
led to improved regulabons and
better understanding. He
suggested an ongoing
communicabon link between
FATF and the private sector. O

January 1996

American Bankers Association

264

ABA BANK

SECURITY

FRAUD

PREVENTION

New Products

Safe personal
checks

Clarke American has
unveiled a new line of
sophisticated checks called
ImageSafc™ that ofFere
consumers increased protection
from check fraud.

The ImageSafc check
enhances the security features of
Clarke American's standard
personal checks using an
innovative design that combines
protective enhancements in the
paper, ink and design.

These features interact to
make the check nearly
impossible to counterfeit and
easy to authenticate.

The ink fades or disappears
when chemically washed. Colors
are difficult to reproduce.

A security screen pattern
distorts or disappears when
copied. For information, contact
Clarke American at (210) 697-
1233.

Security door
controls

The new 932 and 933 Entry
Check Digital Keypads from
Security Door Controls arc
designed to withstand extreme
weather conditions and abuse.
SDC 932 provides 50 user codes
and 933 provides 100 user
codes.

Features include lock output
auxiliary contact for second lock
output, CCTV, tamper alarm,
duress and lighting; a door
position with input for anti-
tailgate or door hold open

alarm; a request to exit input
and more.

For information, contact
SDC at (818) 889-1622.

Signature
verification

Spectroline® from
Spcctronic Coip., is a signature
verification system designed to
work even when a company's
computer system is down.

The invisible signature
system features accurate,
immediate and on-the-spot
signature verification at any
window of any branch.

It adds a permanent invisible
signature to a passbook page or
identification card. A customer
signs a specially coated transfer
slip with an ordinary- ballpoint
pen.

The transferred signature
becomes visible when viewed
under an ultraviolet lamp. For
information, conuct Spectronics
at (516) 333-4840.

Fraud prevention
software

Task Force Software has
released version 6.0 of its Social
Security Number evaluation
software for personal computers.

The program can instantly
alert investigators to fraudulent
numbers.

The new release also has
Canadian Social Insurance
Numbers. For information,
contact Task Force Software at
(800) 397-3085.

Heads up on
some resources

ABA has learned of two
resources of interest to security
professionals.

♦ The University of Windsor,
Windsor, Canada, and the
University of Detroit Mercy,
Detroit, Mich, have put
together an international
money laundering conference
to address cross- border
laundering issues.

The program is scheduled
for May 1 to 3 and will include
academics and U.S. and
Canadian law enforcement
officials, siich as the Royal
Canadian Mounted Police.

For information, contaa
Dolores Blonde (519) 253-
4232, extension 2941.

♦ Need an expert? Here's an
unusual source.

As part of a plea bargain in
an ongoing investigation of bank
employees, federal law
enforcement agencies in the
midwest have worked out a deal
with a banker who embezzled
half a million dollars.

The man is to make himself
available to speak on how he was
able to compromise his financial
institution.

For information, contaa
ABA'S John Byrne at (202) 663-
5029. O

American Bankers Association

January 1996

265

ABA BANK SECURITY & FRAUD PREVENTION

CoHtinufd from pajtr I

UNCFN. Voii nil longer li.ivt to
vcnj MX copies to lixv
cnf'orecniciu and hanking
agencies.

Learn from experts

At the seminar, you will
learn how to use this new form
from banking industry experts
and government agencies who
have been directly involved in
implementing these changes.

You will learn how to fill out
the form and who to go to

when yoii neeJ pmnipi, reliable
aiiNwefN.

You will get answers to all
questions on how to use tlie
new form, including:

♦ whether you are protected
from civil liability for
reporting possible violations
of law.

^ increased thresholds for SAR
reporting

♦ records retcnbon
requirements

♦ how to use the new lorni on
your W

You will he given copies ot
the new software which m>kcs it
a snap to till in the new SAR
forms.

Suspicious Acovity Report
Seminar presenters include:Iohn
Byrne, Senior Counsel,
American Bankers Association,
Member of the Bank Secrecy Act
Advisory Board; Richard Small,
Senior Counsel, Federal Reserve
Board; law enforcement officials,
industry bankers and other
industry experts. O

Suspicious Activity Report Seminars

Seminar RegistraHon Fe«:

$169 ABA member; $210 Non-member

Special Team Fee:

SI 30 each (discount available when 3 or more people
from the same member insntuDon register at the
same time.)

Hotel Information:

A block of rooms have been reserved for seminar
attendees. If you need hotel accommodations, you
can contact the following hotels, which are offering
special room rates. To obtain a reduced room rate,
identify yourself as an SAR Seminar participant when
making the reservation.

Chicago:

Palmer House Hilton, 17 East Monroe St.
Chicago, IL 60603 (312) 726-7500.

Price: $ 145 (Uote: seminar will be held at Fim
Chicago Center, Fim tiational Plaza — Plaza Level)

Philadelphia:

Doubletree Guest Suite, 4101 Island Avenue,
Philadelphia, PA 19153 (215) 365-6600.

Price: $115

Georgia (metre Atlanta):

Sheraton Gatewav Hotel, 1900 Sullivan Road,
CoUege Park, GA 30337 (770) 997- 1 100.
Price: $124

Registration Form

Yes, I wont to register for the SAR Seminar in:

D Chicago, April 2, 1996, 8:30 a.m.- 12:30 p.m.
D Philadelphia, April 9, 1996, 8:30 am -12:30 p.m.
n Adanta, April 11, 1996, 9:00 a.m.-12:30 p.m.

Name:

Tide:

Bank:

Address:

Telephone:
Fa.\:

Payment:

Total amount enclosed: $

Check, payable to ABA D

Charge: D VISA D MasterCard

Card No

Exp. Date:

Phone:(202)663-5274 Fax: (202) 828-4531
Mail to: Registration Coordinator,
American Bankers Association, P.O. Box 79129,
Baltimore. MD 21279-0129

January 1996

American Bankers Association

266

ABA BANK SECURITY 8c FRAUD P R E V E N T ION

Ounce of Prevention

Say 'No' to Auto Theft

(reprinted with permission from State Farm Insurance Companies)

While you can't fully
safeguard a vehicle against
theft, you can reduce the
chances of becoming a victim
by using these tips from the
National Insurance Crime
Bureau:

♦ On an average, 13 percent
of stolen vehicles have the
keys in the car. Close car
windows, lock doors and
take your keys out of the
ignition when you park
your car.

♦ Tows account for 10
percent of stolen cars. Turn
front wheels sharply to the
right or left and apply the
emergency brake when
parking. This makes towing
difficult.

♦ When parking your car,
activate any anti -theft
devices you may have.

♦ You invite theft when you
leave items in view. Keep all
packages and personal
items out of sight.

♦ To reduce your chances of
being a car-jacking \ictim,
drive in the center lane
when on a multi-lane
highway.

♦ Don't park in remote areas
of shopping centers, motels
or lots.

♦ Etch your vehicle
identification number in
hard-to-find spots, using an
engraver or dye marker.

This makes your car easier
to identify.

<• Hide your business card or
address labels on the
bottom of floor mats and
under the seat, or drop
them down window
channels into the door
interior.

^ Use a business address on
all luggage tags, rather than
your home address, for
additional privacy. O

Please feel free to use this

copy as a statement stitffer,

poster orfyer to^ve to yoitr

eustomers or employees.

ABA Uutk Setmnty »md fraud

LegUatiTe Bc Kegubtory E<Btor

Rm C3>ingo Cotpontiaa

Pmemtiam a puIdUbed raondtfy by

}cte J. iyax

Chicago, Blmon

Ac ttodaas Dnuioti of die

Agesqr S«po(t SAtor

i(cnaUL.Oick

Charics J. Bock. Jt, CEE

Ainaican Hatiat Anodujon,

Diicctor, SraadJ^Evetttian &

1 120 Coonecticw Avenue, NW

FedentBofciu of Invettigidon

Investigaton

Wa^hu^ton, DC 20036.

ConerfiMtting Edittr

Chexoic^ Bank

SobKcplion am £110 per ycxr.

Kaiea G. Piafcer

Newyofk,Newyo*

$140 per jrear ASAmembet

fmiwHiamJuiittutt

|okal.a>«iEai

McBmCoaSc^

Director of Secotity

sitbia^oa caS l-SO0-3ii-O626.

Coaxpoutioit

Jb liie ^^Mnffoti meuopciam

Geoitfi Mfi& Be Aitodma,

St. I>oidi, Miuotori

reponcifl (202) 665-5087
MlMKiai Sflff

UmaK.»atj

Bldoa W. Ptoetz
Cutver, Indiana
T. E. Walker

FuMitfaer

Vice Ticadcic aad Director,

Cbaioiian of the Board and CEO

LourcDce Price

Coqioate Seouitr

Bank of Foieit

Editor

SeafiotBadc

forest, Mitimippi

HonierV.Mou

Seanie^ WttlMOi^Qn

{7^2)663-SVn

Tboma* W. ii^ Jt-

^^ce Picadent, Cocpar^e

Gcniiee ^vope-Pneme

Invest^Miom &£r>od pjcwuMioQ

American Bankers Association

January 1996

267

/tt^fhnr>ent4

...CAN IT
AFFECT YOU?

Illi: |\TI"K\Vri<)\M HANKI\<. M-CI Kin" ASS()( i\TK)\

268

TABLE OF CONTENTS

INTRODIKTION p. I

WHAT IS FKAIH)? pi

•Overview
•Slatisiics

Wilt) Till- FRAllDSITitS ARF. p I

•InicTiul ami cxicrnul

• Kcnicmbcr u Mispt-dN dcstTipiiim

WHAT YOll SHOULD KNOW ABOUT FRAUD p.(>

• Ihc Dos
•IIk- Don'ls

POPUIAR FRAirD SCHFMES p.K

•I'rimc ll;mk Nolo and Slanilhy Uilcrs olCridil

•llic Nigerian connection

•Shell hanks

•Money laundering

•(ioiinierfeiling

•( iredil card Iraiitl

RFPORT SUSPICIONS pi I

•Anticipaie criminal jciiviiy

STAYING ONE STEP AHEAD OF THE CRIMINAL p 2S

•Training

FRAUD PREVENTION PROGRAMS p. 26

•Step one - Preparation
•Step two - Ikvelopmeni
•Step iha-e • Implementation

HOW CRIMINALS SOURCE THEIR INFORMATION p 2H

C:ONCLUSION p.29

269

INTRODUCTION

11 imlavN liijthly competitive toninurcijilly-drivcn wiirlil,
almost cvcrvonc is a potential \ ietim ol Iraiid; it seems to he a
cost oliloin); hii.siness these (la)s. i raiid has heeome the crime
ol the nineties. It can alTect anyone. an\ time, anywhere and it
respects no lioundaries as it weaves its weh of deceit front one
country into the next.

i-!\panding };lohal financial markets oiler international
criminals ntany opportunities to work their schemes, rcsuliin}*
in an increased numlK-r «»r reported ca.ses oi Iraud I'o assist in
the haitle against it. security directors representing; the mai«>r
workl hanks and hanking groups have joined forces under the
auspices of the hilenuithnuil lf(ink'in}i Si'imily . l.v.voc /V///V»;/
(IH.Sy\). IHSA's mission is to promote the exchange t»f
information Ixiween memhers aiul to assist one another in the
prevention and detection of criminal activities against the
hanks.

In order to .share its knowledge and expertise w ith other
potential victims of international fniud.iHSA has produced this
puhlication. Hie ohjeclive of INTERNATIONAL FRAUD -
CAN IT AFFECT YOU? is to help aduce the incidence t»f
fraud hy thoroughly describing it, listing the measures that can
he implemented to prevent it. examining popular fraud
schemes, and outlining the steps that should Ik taken when
fraud is suspected. This l><M)kki is aimed at tho.se w ho are most
often victimized by fraud: consumers, compan) olllcers.
investors and entrepreneurs.

The probability of eliminating all fraud is unrealistic -
imposing the stringent rules required to d«> so would severely
restrict customer service and impede the operational
efficiency of most bu.sine.sscs. However, IHSA and international
law enforcement agencies strongi) believe that fraud can be
managed. Hie key to its reduction is stopping fraudulent
activity before it gets started.

As you read this b<N)klet. you will note tw«) repetitive
themes - education and prevention. Hy knowing how tt*
detect fraud in its early stages.it is ho|H-d that potential victims
will Ih- able to curb this crime, protecting themselves from
embarrassment and from those who would decei\e them.

270

WHAT IS FRAUD?

Ihc Oxloril iliciionar) tlcfincs fraud as ainiintil (U'ceplfon
ami the use (ij false ivpn'scntatUm: it docs not define Iraiid as
a financial crime. I\)r the purposes of INTERNATIONAL
FRAUD - CAN IT AFFECT YOU?, fraud will be described as
theft, facilitated by deceit, falsehood and/or other devious
means.

I ( )\ cTyicw j

Man\ companies have experienced an attempted fraud or
ha\c actually been viciimi/.eil by this crime in the last few
years And. because new fraudulent schemes are continually
surfacing, they are not always easy to identify. Iraud strikes in
main different ways: just as quickly as one type of fraud is
detected, another is introduced.

I raud is not unique to ivrltiin countries; it attacks eiK'iy
nation in some fashion. althougii some frauds are more closely
associated with specific countries. Physically or culturally
renjote locations, such as i'iiier}ihi}> or (Ivvvloiun^ countries
and third world nations, are especially appealing to criminals.
( cHintries recognized for their lack of conmiitment in fighting
fraud, make good targets km).

Many criminals infiltrate international companies and
institutions with their schemes, crossing numerous national
borders and international juri.sdictions in the process. This
makes it difficult for those in authority to investigate, arrest
and prosecute fraudulent operators (or fraud.sters, as they will
also be referred to in this publication).

I raud is frustrating for everyt)ne involved, except the
criminal.

271

[Statistics I

luich year more and more corporate profits are lost iliie to
iraucl.

Individual financial trauds can range Irom crimes
involving; a lew hundred dollars to several million dollars. In
some countries, the incidence of business fraud has Ixen
re|>«)rted to have cjuadruplcd in the last five )ears - SO per cent
of it resulting from |)oor internal security contr«)ls.

Although statistics vary iroin country to country, one
recent study conducted hy an international iorensic
accounting firm cMimates that appntximately 27 (u-r cent ol
all fraud was committed against banks and other financial
services institutions, 29 |KT cent against investors, 21 per cent
against commercial companies. 19 per cent against
governments, and four |x.t cent occurred in nUwr areas.

If a company is se-en to Ix- vulnerable, criminals are m«)ie
likely to attempt to exploit it. Therefore, it is imperative for
management to .stay one step ahead of criminals, anticipating
new types of fraud Ix-fore becoming victimized.

272

WHO THE FRAUDSTERS ARE

I hose uho gciKT.illy ohiain material aihanta^c hy iiniair and
\\ri)n);liil iiicans or by falsely representing; themselves are
commonly knoun as Iraiidsiers I'here is pio ma^ic Ibrnuila that
can detect pe(»pie who exploit others: nor can they Ix- lypicall)
described I hey are just dishonest indi\idiials who attempt to
dceeixe their vie tims • usually cjuite successlully.

I raudslers are often ex|>osed by thanee, unless they leave a
trail ol e\ idence behind them ■ which they rarely do. One of the
reasons win these criminals are diificult to apprehend is because
they appear no dillerent than honest folk The only distinction is
that they are plausible liars who often seek to exploit elements «)f
^reed found in many of their victims.

! jmcmaj anci c-xtcniaj )

fraud can strike a company internally or externally.
International studies show that in some countries, more than half
of ail fraud is engineered by employees with or without the aid of
outside accomplices. Thinkin); internal fraud is easy to conceal,
entphiyees often Ix'come involved in purchasinj' fraud, cura*ncy
and slock theft, checjue forgeries, and false loan procurement.

Internal fraudsters are usually motivated by op|iortiinity.
basic greed, rexenge. the need for quick cash to support an
acc|uired lifestyle, or to repay gambling or drug-related debts.
Once exposed, cinworkers often admit thai they had been
suspicious of their dishonest colleague but fell unable to act for
one reas«)n or another

It is generalh believed that about half of all frauda'lated
offences are external • committed by professional criminals
ha\ ing no previous relationship with their victims.'llie POPULAR
FRAUD SCHEMES section of this publication descrilxs the moa-
popular, contemporar). external fraud scliemes.

\X luther \ou encounter internal or external fraud, then* are
certain prot«>c(>ls that should be observed to assist authorities in
arresting and con\iciing the criminals inxolved lliese measures
w ill be outlined throughout this publication.

273

r • ""■ ' "

I KcmcnihtT a suspect's description ]

M yoii stiN|x-ci an iiulivicliial is alxxil lo. or has alivaih
comniiiud a iraiKl-rclaicd oITcikc. ihorou^hU cloi tiiiKiK ihi-
jHrsons dcscTipdoii and that oi any acomijiliccs. Ik- mhv u>
inciiidc ihc lollowing:

sex, naiionality, a^c, Itd^hl, huild. complexion, hair,
hcard/njousiachc. cars, iccth. eyes, jjla.s.scs. nt)sc. nioiiih.
hands, scars/distinjAiiishinj; marks/iailoos. accent .
clothing, jewellery. r<M>iwcar, and the nuke anil model
»>r his/her vehicle.

l-nsure youve listed all pertinent information as
accurately as possible. Don't list leatures you can t recall in
detail: inaccurate descriptions serve no purpose.

Once you have compiled this, and other relevant data,
contact the police for sound advice on how to deal with the
problems you are facing.

274

WHAT YOU SHOULD
KNOW ABOUT FRAUD

llohali/aiion of rmaiiciul murkcts. coupled with incTcasccI
iiucrnattonal iradc.has };rL'atly contribiilcd to the incidence of
Iraiid. Ik'caiise it is so prevalent, chances are yon too may Ix-
presented with a suspicitius business propt)sal at some point.
\\ hat will you do?

the rir>t step is tt> remain alert anil report any hiisiness-
relateil mi>givings to the authorities. 11 you have suttered
monetary loss due t«> fraud, quickly react to resolve the
situation in order to deter further criminal activity. If your local
media should learn that you've been defrauded, don't be
surprised if you are asked to respond to some probing
questions.

^bu may consider contacting your fmancial institution if
you are unsure about the legitimacy of proposed business
deaK: chances are employees can recogni/.e a potential fraud.
If questioned about suspicious business transactions when
doing your regular banking, don't react negatively. It's usually
in your best interest if unusual proposals are thoroughly
examincil Your financial institution has been exposed to many
fraudulent schemes, in-depth inquiries may prevent you from
entering into damaging business arrangements.

below are some Dos and Don'ts to consider if >()U
encounter suspicious business propositions.

|rhc~l)os^|

• become knowledgeable about fraud.

• Hnforce practical security precautions.

• Know your customers and their business practices.

• Alw ays be on guard. Be somewhat suspicious of all
business transactions until you arc satisfied that they are
legitimate.

• Ensure customers' identification dcKuments are valid.

• Verify references and addresses when entering into new
business relationships.

• (^notion changes or irregularities in customers' normal
business patterns.

• be sure all verbal/telephone/telex/fax instructions
received are legitimate prior to completing business
transactions, especially if funds are being transferred
from one account to another.

275

iJiMirr rnrii|»n pa\iiK'ni iuins such as kilcrs «)rdvilil .nv

IcKiiiniak- iHlorc ailing ii|vin llu'iii

lUkr Mi.spicioiis iraiisiilions or <KCurrcncc> lo siiiiDr

nianagi'iiuni.

Rit«)rtl iniporlani inlornulion on llic hack or i Iki|iks.

c H paNN|>orl luiinlxrs.

I'lvpari- a Iraiiil AwarciUNs ami I'rcxcniioii l»ioj;ram

(Mc IRAIIl) FRIIVI-NTION PWK.RAMS)

li a M.riou> caM." of Iraud has Ixcn tkiccuil ami mgaiixc

piihliciiy is cxpcclcil, conlacl your I'uhlic Kciaiions

l)cparli)K-ni U> assist wilh damage control.

• Don t take anylhin>; tor };ranicil

• Don't volunteer conlklcntial inlorntation over tiie
telephone/telex/lax unless )ou kmm ami trust ilu>se who
are im|uirin};.

• Don't allow customers lo pressure you into niakin>;
impulsive ilecisions.

f Don't tiiw value a^tainst uneieareil pa\nienl items.

• Don't aicepi thiril party chei|ues Irom new customers
without a senior manager's authori/alion.

• Don't cash cheques for strangers.

• Don't transfer luiuls without first ohtaining proper
authori/aiions.

• Don't iliscu.ss internal operations or systems with
outsiders.

• Don't write tt> suspicious individuals on companx
stationery.

• Don t Ik' afraid to contact the police il you have
suspicions about certain customers and their respective
business ilealings.

276

FOPUIAR FRAUD SCHEMES

lot siirprisingK. Iraiululcni biisiiK's> proposiiions allcci
proiuiiKiK rctinoiuk trends. I"«)r example, ilurin); llic l^Pi)^
when the nil industry was booming and bullion priees were
soaring, main inxesiors were delraiided in oil lease and gold
hoaxes. In the 1980s, with the real estate market peaking,
criminals ilesigned creative Iraiids involving this thriving
bnsiness sectt»r With the economic instability ol the h>*>t)s.
tlu re isn I one particular recurring international Iraiid theme
ihat i^ more popular than another Anything goes these days.

(^iiiie olten. international fraud schemes inxolve one or
more ol the South l^it ilic or ( aribbean island nations that arc-
tax haxens and/or ha\e stringent secrecy laws. Therelore. law
enlorcement agencies cauli<»n people to exercise extra care
when entering into business arrangements in all uniamiliar
territ«)ries.

.Mthough most businesses operating within these
countries are upstanding and profitable, many are not. It is
always important to conduct thorough background checks on
companies operating in (tiiy country prior to signing business
contracts

To lurther assist \()u in detecting international fraud, the
lollowing more lommonly practiced Irauds will be described;

• prime bank notes and standby letters ol credit

• Nigerian Irauds

• shell banks

• money laundering

• counterfeit currency

• chei|ue frauil

• lorgerx

• cminterleiiing

• cretlit card Ihuiil

277

I Prime Bank Notes and Standby Letters of (Tedit|

IraiiilsUTS olun employ sclicnic's iiuoiviit^ I'rinic Hank
Nulls (MHiictimcN relcrrcd lo as I'rinu- hank Insirunicnts
aiul/or l»rimc Hank (iiiarantccs) anil Scamlhy IxUcrs olCrcilii.
Although Ihisi- fraiiils vary in loinpkxiiy, ihcy an- »>ricn ihi-
ni<»si suiii'ssliilly fxctiiCcil btcausc ihcy appear lo In-
lc};itiniaU'.

I jiiinuJiicUons |

(isualiy. vkiim investors arc tliriiily approai luil b\
rraiiilsii-rs - niitUUvnicn ■ who ilaini lo ripn-sini wialihy.
iinnanicil priiuipals. ihc miilillcmin. on hi-hall ol ilir
principals, oKcr lo mII anil cvcniiially repurchase ihc Prime
Hank Noies aiul/or Stantlhy LeUers ol Creilil from ihe
prospeclive investors. Having been promiseil larj;e financial
returns, these investors are usually askeil to holil the
instruments in trust, or to timil proiluci purchases.

ShoukI the investors question how they have been
selecteil as business partners, the miilillemen tell them that
they are extremely res|H-cied investors, known to Ik- capable
negotiators of sophisticated transactions. Essentially, the
fraudsters are hoping lo appeal to the vanity and greed of their
victims.

I Is this really u crime? j

So how is this fraud eventually ex|"»osed? Suspicions tiften
arisi- when the fniud.sters are askeil for background material on
the principals, including souaes of their capital. Ilie middlemen
cannot produce this information, yet try to reassure investors that
deals aa- legitimate, and that all monies involved are s«»-calleil
"g«»od clean funds'.

Iraudsters Ixlieve suspicions will not ari.si- if investors are
asked to act as fiduciaries - those who hold items in trust prior to
credit agreemenis being signed. Since invesiors assume ihat liinils
will Ik- transkrred without any problems, the) d«) not feel
finaiuially threatened. I ransactions stem normal. Victims Ixlieve
thai they will not be inxolved in the purchasi- and/or s;ile «>f ihesi-
insirunK-nts.onlv the middlemen will

278

]

i Dcuviin^ iniiiil J

M ihiN puHii. (Ih- IraiiiKUTs i-xphiiii iliai ir.iiiskT iklavN ami
imIut (.oniplii .iii(Mi> have arisen. VkliniN arc lokl ihai llu* luiuh no
lonpr cMM II) (.iirrc-iKy:alu-rnatc iornis olMiiirily arc mi^cMciI
- olici) Mispcci |)apcr subMiiiiics. InvcMors arc next askcil to
aikaiKi' cash a^ainsl ihis non-cNisk-ni pajHT si'inrih. This is
whin viiiiniN iiKuhiricnih cnur inlu crcilil alaiionships wilh
ihc haiiiKUTN

I ramlMirs hope ihcsc events \v«mi Ik nttlieed aiul thai any
ereilii reviews ami approval processes are eireuntvenieil by ihe
iiiMslors anii( ipalion ol sipiifieani financial reiurns. Only when
iiisiriinienis are iliie ami paxable are the Iraiicis ileieeteil.

Here is .m example ol this Iraml it may help \ou to
leeopii/e it il \oii are Jpproaehecl l>\ a Iramlster:

\ hiiMiKos iHrvMi is pniiuiNttl .1 si.iihII)\ Irtur nl < rivlil unrih
I ssliNi iiiilliitii iiiU'ivM live, .iiul <tisiuuiili il III Kli |ht tiiil n| iis
l.uc x.iliK II IN |>.i\.ihli' in I ^ iiionilio h.i^ Ihiii iomuiI In .tnAM.iii
h.ink .iiitl iiiiiitrMil In .« I s luiik llimiuT ilii' htiMtUNN |m rviii
(■> ii(|ii(su(| ii> |>rii\i<tt llu- liiiuN lor ilk piirduM iiiniuili.iu l\
Wiun iIk ilt.il IS .i^trtrtl iipun. .1 ir.uitliiliDi M.iiull>\ IvlliT ol
( n ill) IN ioMK tl nil Ih li.ill III llu' pniu ip.il Alllioii^li ilu' ir.iiis.Klinii
.ippi .UN .iliii\i Imi.iiiI ii in iiiti It is niih wilt 11 tlu Imisiik'ss ihi'mmi
wislio III iiK.isli iIk Itiin III ( ivilii II is n.ili/iil ili.ii this is ,t
ti.iihliiKiii iiisiiiiiiuiU

I Ik' eautioiis |

Alwaxs resist promises ol inordinately hi^h returns ami
jiuaraniees ol emikss supplies ol lumlin^ Nothing; ever comes
lor Iree Ihink twice when youre prcsintcil with contusing
business proposals or when potential business partners
siippb \amie answers Ami shoukl you ever be rci|mstcil to
provide letters printed on your companv letterhead. out linin^i
potential new business relationships. alwaxs decline.

Kemembir. y«>ii are the onh one who can saw yoiirseir
Irom Iraud.

279

The Nigerian conned ioii]

S<»nu- lounirir.s an- kno\Mi lo have nunc Ihan ihiir lair
shaiv ol rcsiiUiH IramlMcrN. iNi>;iria is one ol lliiin. Liw
inlori I incni ajiincits worUlwiilc arc «>nl\ um laniiiiar wiih
Nijicrian Irauil TlK-rc is howiwr. wry link- thai ihc\ can ilt>
ahoul ii.cxccpl lo caiilion people aboiil ils prevalence and iis
iniriiacics.

I inancial losses e\|Hrienecil as a resull o\ Nigerian Iraml
sihenuN are esiiniaicti lo he in ihc millions of dollars - ihcse
losses coniiniic lo ni«>uni. Most oHen. people initialing
Nigerian Irands arc cnltiircd. |xilishcd. nuillilinjiual. and nncII
educated It is not niuisual lor these Iraiidstcrs to intpersonate
^oM-rnnicnt olllcials or business |>ersons. I 'nioriunateh. sonu
nnserupiiloiis p>\ernntent olTieials ami business persons are
olten the aiiual Irandsters.

Man\ iinsnspeclinn people respond io Nigerian Mail
Seams, seniling banking and personal information to
Irandsters Son K- have been known lo lly to Nigeria. at risk to
their own li\es, to exeeme business transactions. Still iHhers.
withotit thinking, even supply additional gihs or bribes that
are retniested by these Iraudsiersisueh as e\pensi\e watches,
ailditional cash pa\nu-nts and holida\ p.ickages. Criminals are
so pi rsistcni that even whcit their victims ha\e ilisc«)\crcil
the\ \e been dclraiKJcd. the Irandsters will olten maintain
their innocence and .seek lo continue the deal.

Although Nigerian Irauds appear obvious when brought
to our attention, many astute business people and iiuliviiiuals
haw been deceived by Nigerian Irandsters The best wax to
prolcit xourseir against the numerous Irautis assoiiateil with
Nigeria. is ut lamiliari/e yoursell with them Inlorc \ou and/or
\our company are \iclimi/ed.

280

Mail aiul atUai Kc Ic e IniiKls |

llic usual lactic of nondiscriniinaiin^ Nigerian IraiKlslcrs
is lo send Idlers l<> inclixiduals and husincsscs worldwide,
odcrinj' jireai sums ol monc) lor no particular reason • mail
fniiids Ihese letters ask for personal inrorniation. Invariabh
Unaiuial transactions are also proposed, always involving
i lenienis (»l illegal actix ity including corruption ol government
olficials and \iolation of national currency controls.

Once the victims have been hailed - providing
intormation and money - they are informed that problems have
.uisen anil that the Nigerian lunds cannot be released unless
the Iraudster receixes an adraiuc Ji'v, usualh a ixrceiitage »)!'
the original pa\-oll or a pre-iletermined lump sum.

281

[A sample business proposal |

llriv is a sanipir ol a l>pical Ni};criaii Iraiul kiur. S4>nu'
tla\, >«)ii nia\ receive similar eorrespoiulenee. Doni j;el eaii^hi
in (he trap.

Strie i ly Conlklen iial

Dear Sir:

Alicr due ileliJH nil ions with my ei>lleaKiies. I am lon\ iriling this
hiisiiu-Ns pri>po.sal lo you. WV need a reliai>lr |Htm»u to iraivsicr
$.SH SM into ilieir hank aeeoiini.

I'liis liiiul cvislN aN a ri>Hll ol'an oM-rinvoiri- Intin a p»\rrnnK-nl
loniraei riu- loiuracl has juvn exceuud aiul ilu- eontraeior has
hicn p;iid. Wc an now leli wiih the halanec ol $.^K SM ihai was
ililihiTatcly «i\er-esiimaleil. As eivil scT\anis. \w are lorhiililen lo
o|Hrau- or «iwn foreign aeeoiinis. iherclore we wouki rit|iieM that
yon Iransael our husiness. keeping; .SO per cent ot iIk* total for \onr
ex|X-nses.

I reeri\i-il )«Hir aiklresN Inmi onr ( hamlvr «>!' (lommi-riv aiul
hulustryAiul I am a top olfleial with the Nigerian National IVlrolenm
( or|>oration rhis transaetion i> Tree Irom all risk

To gel this fiinil paUl iiuo your aeeoiini, we neeil to presi-ni an
iiilernaiional hnsiitess profile lo onieials rei|iiesiin}; this inlormatioiv
I'leasi- loruaril hiank I'opies of ytnir eompan\'s letterhead and
itnoiees. sifined and slanipeil on eaeh page: >our h;mker\ lull
aiklress. telephone, telex and lax ntimlx-rs; h.ink aeeoiint niiinlxTs:
and private telephone/lax numhers lor eas\ and eoniideiitial
eomnuinieaiions.

^bu ma> Ih- reijiiireil lo sign a lund releast.- in our National liank:
three ollk i:ils will come to \iiiir eountry to arrange this.

Ixt honest) aiul trust he our walihwonl throiiglumt this
iransaition.

Ik-si reg;irdN.

282

I'l.ix ii Miurt i

A DUihiul ol N|)«>iiin>; ;i Mail or AiUaiKc Ice i nuid is to
M.iiiiini/c an\ iiirorniaiion supplicil to \oii. i.cnci'> arc
Ui nir.ilh ot poor (|iialit\. although lhc\ can MMUcliiiKs a|)pcar
i|(iiu k\uiiii)iai(.-. riic> max ixcii incliiilc ollkial-looking
,uo\i-rnnK-ni Manips anJ M'al>. aiul arc olicn acoiinpaiiicil l>>
am iu'iiiic looking: ilociinic-iits.

^oii should In- aware that Nigerian traiKlMirs arc Ixikl
rnodgh to Nciul seemingly legitimate hank telexes to their
xKiims hanks, asking lor credit checks to he done, ensuring
\ minis can guarantee rei|uired payments. Sometimes
lounicrleii hank ilrahs. drawn on the (.cnlral Itank ot Nigeria,
are e\en lirculaied - paxahlc in the victims names There is
liiile ilouht that ihesc fraud artists are inventive.

Hanks spend a great deal ol time alerting customers to
ionhrm the legitimacy of Nigerian contracts However.
nuli\iiluals grecil iniluces their involvement in these frauds -
i\en when hanks achise against it - oiten resulting in large
hn.uuial losses, not to mention emharrassment.

Midi hail ivN I

Manx Iraudulent schemes inxoixe slwll htiiiks t»r
hniss/fltilv hiiiik's l\w\ are appropriately named Ixcause they
are hanks that exist in name only - without assets or internal
siruciure - empix shells. I'hese financial institutions are usually
registered hy a solicitor or accountant: olllce stall are listed as
shareholders. Shell hanks have one or more mailing addresses
- usually a post olllce hox or mail collection agency.

Legitimate or iliegitiniatej

Some shell hanks are legitimate, operating as ollshore lax
shelters Manx, howexer whose services are freijucntly
marketed, are fraudulent.

283

t.cj'ilini.iU' nIu'II l>:ink> ;iri' Ik iiiscil, lU.il in lorci)*!!
i iiiKiK'x.ilo Doi ;KVi'pi I<h:iI iliposiis.aiul ilo iioi inuli- ItKalh.
11 n|HT.iliii^ ilk^;ill\. ciic(|iK-N. ilralls. (.rriifKalcs ol ilcpoNii.s,
and kiurs «>! iriilil arc issued. Olun d».|>«)siis aiul loan
hiisiiu'ss arc solicilcd Ironi unsiispcclin^ indixkkiais looking;
lor a >;«mkI ileal.

Criminals invite invcslors lo <»pcn deposit aeeoiints
which pa> iiniisiialty hi^h rates ot interest. N'kiinis are also
attracted hy loans with low interest rates, riiesc iinii|iic
Iciuling opporinnitics often appeal to inilividuals who cannot
(|ualil\ lor loans ironi Icpliniate institutions.

Shell hanks sonictinics claim to he s(i|)poricd In one ol
the WOKI.i) or IM<IMi: HANKS: their names ma\ he sirikiiiKh
similar lo jteniiine. international hanks. This makes them
diiriciill to delect. Many of their names include the iollowing
words: international, commercial, united, mercantile, trust,
credit and merchant. Mixing; and matching these wttrds. along
with the inclusion ol the word hunk and the name ol a cit\ or
country. can produce a very lormal souiuling namcconliising
even the most astute hankers.

Ikcause licenses are relativel> easy to acquire in the
(:;irihlx-an or Asian l^icific island nations, customers sliould
seriously research hanks operating there. One should also he
aware of the illegal shell hanks that advertise unU|ue husiness
pro|>ositions in international newspupers - they are not worth
the pa|HT on which they are printed.

284

Don I IxviMiK- a \ ictim |

How .lie iHopIc ik-irauik-cl hy criiuinal.s operating shell
banks' \Kiim> uho inakc diposiis with shell hanks simply
lose tluir lapiial. (hose seeking; loans are rei|iiired to pay
a(.lvaiKe lees lor loans whieh never maleriali/.e.

Moiic) launclcrin^ )

Money laiiiulerin^ is (he praetiee ol eoneealinK illieit
liimls generateil Iron) illej'al aeliviiies - convening eriniinal
money in(o seeniingh le};i(inia(c income. Irauilsteis dean
their moiie\ so i( can he used legally, wiihout leaving; paper
(rails lhe> do this hy processing; liinds (hrouKli international
|ia>men( systems several limes, ohscurinj* any audit trails.

International drug Iralfickers aiul or|;ani/.ed crime groups
are notoriously associated with this activity. Although there
are no reliahle statistics on the si/e of the glohal money
laiiiulering prohlem. policing agencies around the world
estimate it to he in the hiilions ot dollars.

I'o comhat money laundering, many countries have
introduced legislation which crintinali/.es this activity. Hiese
laws olten include proxisions lor Iree/ing. seizing and
lorleiting the proceeds from criminal activity. Most large
international financial institutions have also estahlished anti-
money laundering procedures, co-operating with law
enlorcement agencies in an eliort to curh this criminal activit>.

Alwaxs ensure you are conducting legitimate husines.s
iransaitions so \our company does not unwittingly involve
itseir in money laundering schemes.

285

f(l()UiilcTrcitiii|; I

Coiintcrlril insiriinKiiis arc pnuliicid Irom originah.
iisinj* Nophisikalcil graphic aris caimras, NcaniUTi-i|iiip|H-il
pLTMinal coinpiKcrs. plasiii card rcprodiKiion. laser printers,
coniinon colour photocopiers, anil conventional printing
icchnii|iic-s To assist yon in ilc'iccting this illegal activity, three
l\pes of conntcrreiling will be* described here: cnrrencx.
clKi|ues and credit cards.

Technically, counterleiting a'lers to the illegal process ol
reproducing currency. However, because it is so often
associated with the illicit duplication or forgery of cheques,
credit cards, sec initics and other payment instruments, for ihe
purpose of this piiblicaiion the word lounterleiting will refer
to the process of forging any of these items.

[ CoiMiterfcil currencyj

(iounierfeiting currency or banknotes is one of the oldest
forms of fraud.

With the stale-oft he-ari technology axailable today, the
incidence of coimterfeiling has increased dramalicalb.
Although the si/.e. shape and denomination of currency varies
from country to country, todays reprographic ei|uipment
seems to Ix- able to duplicate all kinds of currency.

Milli<ms of dollars are lost annually to currency fraud.
Therefore, international task forces ha\e been struck •
comprised of representatives from government treasury
bureaus and technological firms • lo ilevelop systems to deled
this crime, lor example, with ihe assistance of experts,
manufacturers of colour photocopiers have introduced
.security features which prevent currency fn>m being
repnKluced. .Sensors in these copiers priKluce blank cop>
when duplication of banknotes is attempted.

99_«n9 n Qc

286

! Ik- on I he InokoiK I

NoiiKiinuA il is cxirciiKly ilirtkiiil l<> klcniil\ coiiiiicrliii
turriiux IlKTiiore. always pay close aiuiitioii wIkh
.Kirpiin^ hanknous - cspicially bills ol lar^c dnioiuiiiations.
t Ditiriunaulx. ihost.- aicipiiii); rratuliiU-iU iiirrciKx aiv ihc
oiu-s ulio iiuur inoiU'laiA losses. Ik* awaiv ol the latest
eounierk-itiog siheiues (.onsult \oiir local police department
shodkl \«i(i liaxe an\ ([uestions.

lo he sale, il \oii are unsure ol the auihenikit) ol a
banknote, alwaxs ask the presenter lor iilentiricalion.incliKlin};
a pass|)«)rt nunilxr Ik- particular!) vigilant when ncKoliatinfi
lar^c .nnounis ol lorei^n or domestic currency. II you ve In-en
unloriunate enou>:h lo have prexioush receixed counlerleit
banknotes, keep a record lor luture relerence iktaitin^ ihe
pariiculars. including their origin, currencx name,
ilenomination and sirial numlx-rs.

I ( he(|iie hand i

lechnolojix has dramatically changeil the cheque clearing
pnness the sxstem xvhich si-nds chei|ues through the bank ol
a recipient - returning it to the original or ilraxxee bank lor
paxment

Years ago. che(|ues were pnaessed by hand. Although
sorting these instruments manually xvas laborious, it gaxe
those reailing them more ol an opportunity to iletect lorgeriis.
Noxx. automation alloxxs significantly more chei|ues to be
tleareil. Iloxxexer. bank processing machines olten cannot
detect Irauilnleni chei|ues. resulting in hundreds of millions ol
(.l«>llars Ixing tost annually to chei|ue Iraud.

[M«)len and lorgetl]

Ohen Iraudsters steal personal or comjiany cheques
pax able lo legitimate indixiduals. lindorsement signatures are
lorgei.1 anil cash is deposited into the fraudsters' accounts.
( heque Iraud is also committed when authentic blank
chei|ues are stolen and completed, naming legitimate or
iabricateii paxees. ( riminals torge the endorscinents and cash
these cheques.

287

I AlU-r.ilions |

III ;uklilioii in i han^in^ ihc serial lUiinlHis thai apiHar
on ilK-i|iH-N. Iraiiihurs also change ilu* nanus oi paucs
aiul/or ilu- ainoiinis appiarinK on Ic^iiiinau- clK-i|uc-s. monc>
onliTs or oilier insiriinunis of paynuni. Al\va)s pay close
aiuniion to ilu* eiulin^s ol dollar amtxinis appearing on
ilK-(|iii-s • Ixiili Ilu- niinK-rals ami the words slioiiUI In* iilcnii-
cal KenunilHT thai nc^oliahlc insiruimnis are olien altered
by skilkil loriiers usin^ sophisiieated nietluKls. Iluy ean he
dillkult to delei I

llopehilly. iliesi* points will help yon to detect eonnierleii
i hei|iu-s:

• no two elie(|nes draw n on the same aeeouni should hear
the same sirial numlHr;

• ihe(|iie paper is }>enerall\ dull Shiny paper ma\ indicate
a colour photiHopy;

• (hei|iies should have al least one perlorateil eil>;e;

• the (|uali(y of the printing that appears on chei|ues
shoulil Ih' crisp and clear;

• MICK (Magnetic ink Character Kei (ignition) characters
appear at the liottom oi all the(|ues:

• MICK ink should Ih- liull. not shiny:

• MK.K characters and any woriiing a|>pearing on che(|ues
should not he raised ahove the regular suiiace or the
papir:

• look ibr seiurit\ leatures such as uliraviolet niarkin>;s
aiul watermarks il they are known to Ih- present on the
};enuine |>aymeni instrument.

Che(|ue kiting |

Kiting, or cross -Uring, is one oi tlie oldest kiiuts ol hank
Irauil it involves the manipulation oi two or more ilu-(|uing
accounts hy exploiting the normal delay in the clearing oi'
chei|ues from one hank to another (^uile simph. it is the
huilding oi iictitious halances or credits, hased on uncleared
clie(|ues rile iiuideiue oi' kiting has Inen signiiicanth
reduced hy modern-day processing, limiting the delaxs
iiuohed when clearing chet|ues.

288

litis IS liow kilin^ >\i>rk>:

\ kiiiT Will write a (.iu-qiK' <>n an aicounl al lUnk A wIkti'
tlu-rc an- insulliiicni Itiiul.s lo co\cr its cicariiif;. Il<iwcvi-r.
hittirc it ikars (Ik* kilcr ilr|x>Nils into his aicouni al Itank
A. a ilH-(|ta- ilrawn on an accuuni al liank It. mi ji lowrs ilu*
lUarinti ol ilu- lirM ilu-i|ii«.- I'Iun pnuiss can coiitiiiiic
ihrongh an\ luinilKT nl hank aiioiiniN WIkii kiiin^. a
IraniKur lan huikl iar^i- haiaiKx-s. williilrawin^ IiiikIn
IhIoic cIk-(|uc-s art- rrinrncil anti Irantls aiv iliiitifil.

l'rc\cniion j

(.Ik-(|(ic- IraiKl is ;iii iiitcriKUionai problem and (tccurs in
many ilitrcnni ways It is important to rcmcmlKr that you arc
nsponsihU-. as the person accepting che(|iies. to verify their
autlienticiix. as will as the legitimacy ol the people presenting;
those ehet|iies. (aretiillx examine all chet|ues prior to
ai cepting them.

I he lollow ing list shoiikl assist >oii in preventing cheque
Iraiul

• iheques shoukl al\va\ s Ix* examineit to estahlish their
authenticity:

• \alue shoukl not he given against uncleared foreign or
ilomesiic items unless you know your customer:

• rei|uest two identification d»)cuments when encashing
chet|ues:

• cheques should Ik* endorsed in your presence: if
signatures are irregular, notify your supervisor;

• he sure that written and numeral amounts appearing on
cheques correspond;

• check for spelling errors on cheques.

289

ICrc'clil card Iraiitl |

()\cr a hilliou U.S. iloliars is lost aniuiailx lo iiiicrnaiioiial
crcilil caril Iraml. 'Ihc Irajiilsu-rs \\ lu> s|Hciali/v in ircilii taiil
trinu- an- ircaiiw in ihtir nKlhoils anil <>|Hrau- in cxcry
coiiniry in u hith pla.Mic cards arc \\ iilcl> unciI a.> in.siriinK-nis
ol pa\incni.

There arc many ways that criminals obtain ilic i rciiii cards
ihat they ii.sc Iraiidulcntly. Some cards are stolen h'om wallets,
residences and automobiles, others are interce|>ted while
travelling throii}(h the postal system • pre and post deli\er>.
Criminals use stolen cards mainh to acquire p>ods and
ser\ii es anil to make cash withdrawals at hanks, or hankm>;
machines il the> also have the correspomling personal
identification number or security cmle.

Sometimes. Iraudsters can obtain credit cards by opening
bank accounts usin^ fictitious names and/or ie};itimaie data
jH-rtainin^ to genuine indi\iduals. Next, the) complete credit
card application forms. Ifsuccesslul in obtaining creilii cards.
Iraudsters disassm iate themselves with addresses li.sied on the
applications anil use the cards until the frauds are e\eniuall\
delected

Ite aware of the extent ol' Ihiudulent credit card actixilx.
Ikcause ol its pre\alence. il will someilay probabh aliect you.

Stolen credit carils are generally used b) Iraudsters lor
two or three days - usuallx the length ol lime il i.ikcs lo list a
stolen card on a (jvdil (.aid Wuinhifi //.>7.

(redit card Iraudsters can Ih' delected il signatures lound
on the backs ol credit cards do not match those itn the
transaction vouchers. 11 they dilier, iinlicate this when calling
Credit Card Auihoh/aiion Centres b> signalling with the
appropriate emergency aleri. The centre will activate a
distreet sivurity response. Try lo delay the customer until the
authorities arrive - but never at risk to vour own silelx

290

Al\\.i\> ri|>«»rl U»Nl. >l»)k-n or non-iU-liM-ri-il c.\i\h
iiiiim-ili;iu-|\ to niininii/t.' IniiKl. li you noiiii- ili;it ;i luinitxr ol
iii).iii(liori/i'il ir;ins;Klion> have Ihcii ivionkil on your
M.iicnK-ni. rrpori this to your financial iiiMiiulion.

iodax. Iraml can aho Ix- ilclct kil h\ in house Maic-o(-ihc-
ari luiiral nriworks or knowUilKi-basiil Iraud monitoring
s\>UinN ri-((i)(l\ inNialkil ai many inicrnalional linancial
inMiiulions IhcM.- nclworks are compukri/cil sysirniN which
prolik' unusual or Irauiluk-ni transactions I hey can also assess
merchants sales patterns, or customers' hu\ing habits. M
purchases lit IraiKl proliles. the caril-issuing linancial
institutions inxesii^ate by calling canlhoklers to determine if
purchases are leKilimaie.

; Retail Iraud j

Retail irauil occurs when dishonest merchants and/or
their em|)lo\ees s4.ll customer credit card iniormation to
hauiKters. (ounterleii creilit cards are then manulaclurcil and
Nokl to other criminals. Issuing; institutions are generally
unaware oi these Irauds until cardholders ailvise them ol'the
unauthori/eil transactions appeariii}* on their statements.
Sometimes. In»\ve\er. the\ may be detected by in-house
monitoring s\ stems.

Ketailers ha\e also been known to niake two or more
(.reilit card transaction slip imprints when customers are
making purchases Once custiimcrs leave the premises, illegal
sales are transacted.

: \\ arning >ign'»J

.Mihough it can Ix* dilllcult to uncover criminal credit
lard actixit). Ix- axvare ol the killowing warning .signs:

• lurxouN or suspicious Ix'haviour bx those presi'nting
I redit cartis;

• signatures on credit cards thai do not correspond to those
on traiis;iciii»n xouchers:and

• creilii canls w iih comiiKncement dates of the current
month, indkaiing cards niiiy have Ix-en stolen prior to
delixerx

291

|('.<ninu-rl'cii cri'tlll lank |

InuTiiaiional credit card counicrlciiin^ costs the world
hanking comnuinity approximately USS.^SO million annually. It
accoiinis tor al'Hiiit one-third ol all iniernalionai credit card
Iraud activity. The production oi coiniterleits is olien
C(M)rdinated hy international organized crime groups, typically
originating in the Asia I'-acilic region It is truly a global crime,
with plastic cards iK'ing cut in one country, holograms
priHluced and applied to cards in another, magnetic stripes
encmled and ainxed in a third ItK'ation. and fmal products
Ix'ing sold in yet another country where they are Iraudulently
used.

White plastic (raudj

Credit cards can also be counterfeited by altering and re-
emixKvsing genuine charge, credit or debit cards, and re-
encoding details of authentic account numbers onto the
magnetic stripes of other stolen cards. In some cases,
legitimate credit card data are eml>ossed on blank or while
plastic cards. Properly encoded magnetic stripes are also
alllxed to the cards, which are then used to defraud card
issuers. Known as irhite plastic fro lui, this criminal activity
retjuires the assistance of dishonest merchants.

292

REPORT SUSPICIONS

■

Hi Ih ;nvni^c' person is loially unawaiv ol the ma^nitiKli.- ol
Ir.iUiUilciK activitx thai (KCiirs on an ongoing basis. Having
read l\n:R.\^ni()\AL FRAUD - CAN IT AFFF.CI YOU'/ to
iliis point. \(>ii slioiiUI uiulersiancl its lar-reaehing elleets and
he ahle to better iJeniiiy examples of this erinie.

H eannot be entphasi/ed strongh enough that iinlaniiliar
companies need to be investigated thoroughlx if you are
contemplating a business assoeiation with them Walk away
Irom cjiiestionable aeti\ities: never be afraid or loo
(. nibarrasseil to immediately report them to >oiir loeal poiiee
departments, these authorities are there to help you to deter
new ami repeat olfenders. They reevixe regular updates on
^uel.es^hll aiul unsueeessfui frauds, and will often reeogni/.e a
particular fraudster's method of operation.

Aiiiicipaic criminal acliviiy]

If \ou become suspicious of a recently established busi-
ness relationship, terminate it. Companies can appear straight-
forward at the outset. Once theyvc earned your trust, they
may subse(|uently initiate criminal activity. Similarly, lerminalc
long term business dealings with ass(K'iate companies if man-
agen)ent. for some reason. Ixgins to act peculiarly. Take noth-
ing lor granted.

.\lso. be cautious of those approaching you professing to
rej^reseiit legitimate banks. If they tiller to deal with your com-
p.m\ and >ou are unfamiliar with their fmancial institutions,
refer to such publications as the ■iimikcrsAlnitiinn: htlk's
fnlcnmlhnidl lUiiik* DhviUny or Unuusnii lUmk DiivcUny,
w hich can Ix- found at your l(»cal library. They list all the major
international banks, their histories, ownership status, aiul
assets and liabilities.

.Mi«»ve all. rememlHT. if a deal hniks t«M) good to Ix* true, il
\erv likeh is - and usuallv involves fraud.

293

STAYINCi ONE STEP
AHEAD OF THE CRIMINAL

d,. -.-....,.«,„-

consider contaciiiig sccuriiy spci iali.M.s aiul/or Uka\ polkv
orfKirs lo ilisc'iiss ihc laltsi prcvciuiw imaMiri> ili.ii tan In-
inipknu-ntc-il (o proicci )oiir t<»nipan>. Hay will aiklrcss
popular traiKliik-ni ac(i\il> anil rcconinKiKl local seminars
Ihai ma) Ix" ol interest. lAeryone. Irom the presklenl ol a
nuiiti national company to the sole proprietor, shonki know
how to ri};lit fraud - only the well intormed can deter it.

|1'rainiiigj

^oii may cjuestion the need for ohtainin^ irainin^i in mat-
ters pertaining to security. Don't. Il will protect vour company
by:

• creating an awareness alioul Iraiid;

• lamiliari/ing )()ii with actual iraud cases:

• outlining how monetary losses have resulted
Irom previous Iratidulent activity:

• underlining the importance of preventative
measures;

• reilucing the incidence of fraud;

• helping to deal with actual frauds in
progress.

• explaining how to recover part, or all of the
monies lost, due to u fraud; and

• preventing similar frauds from rcHKcurring.

If you feel it is warranted, you may JK-nefit InMii preparing
a program outlining how your company should deal with
fraudulent activity. This, coupled with professional security
instruction, will help you lo ftKus on implementing sound,
protective measua-s.

KememlxT. education is an essential component of fraud
preveniion.To further protect your company, perhaps you may
wish lo go one step further...

294

FRAUD PREVENTION
PROGRAMS

fraud PtvivntUm Programs can Ix* tailored lo nice!
cxfryoiKs iK*cd> Tluy arc iisc-ful to develop and implement
iH-eaiisi- tlie\ force companies to thoroiighl) assess their
>cciirii\ operations. Stren|»ths and weaknesses are qtiickly
k.irned Voii will also ideniif)' areas where fraud has been
ilisco\ered in the past and where it can resiirl'ace.

So how do you start developing this program?

I Sicp one - Preparation J

• Identity employee knowledge and awareness levels agarding
Kimpany fraud pa*veniion procedua-s. Refer to the specific
l>oints in the IK)s and IX)NTs listed in the section entitled, WHAT
YOl) SIKHJIJ) KNOW ABOUT FgAUD Review any existing
security pHKcdures. I;nsurc that information atxtut fraud is circu-
lated regularly including fraud notices, publications, bulletins, new
iniiiaiixcs and preventative measua's.

• IKtermine if your company has ever been victimized by
the following;

- stolen cash - counterfeit currency

- stolen che(|ues - fraudulently altered checjues

- forged documentation - falsified inxoices

- illegal letters of credit - erroncjuis instructions

Having regard for the above, and by assessing the eight points
found in thelRAININti segment of the previous chapter, STAY-
ING ONE STEP AIII-AD OF THE CRIMINAL, you have complet
cd the initial research phase of your I'miul FtvivntUm Pnt^ram.

295

(■

I Step two - Development

• I'a'paa- ihc wrilicn portion ol the IraiKl Prevention
Pn»gr.im. The Plan, conlerring with local |)oiieing agencies
if neeevsary. List the pnKedua's and implementation steps
needed to secua* )(>ur company.

• linsiia- that senior management (if applicahle)
endorse> Tlw I'lun.

• Confirm that n'Mina'cs aa* available lor neeesiary employee
training programs.

[Step three • Implementation |

• Distribute The Plan, a'viewing and ii|Hlating it
when necevviry.

• lixeeiiie 7/>e Plan.

With your I'raiul Pnuvnthni Pntfiiuin in plaiv. \«)ii
should Ik Ixiler able to delect, and prevent Iraudulent activi-
ty which may target you or your company.

296

HOW CRIMINALS SOURCE
THEIR INFORMATION

;i\ aiui iiKlic'clivc hustncss (>|HT.iti(>nN arc open invitaiioii^
lor IraiKlMcrs l<» strike, rhcrcrorc. compaiiio nuiM rely on ihcir
employees lo ensure ihal se'curily measures in place are toliowed
()nl\ (hen will companies be sarcgiiardecl against Iraiid.

Hiisiness policies, especially those that can inHuencc fraud
and Iratid prevention, nuist tx- maintained as classified. (Jient
i (tnlidcntialiiN must also he guaranteed unless customers agree to
all(»\v the release of their personal information, or should a court
oriler demand it. It is a serious criminal offence to divulge
inlormation lo outsiders for frjuduleni purposes

There are many ways, other than from employees, for
fraudsters to obtain information to execute their crimes. I'hey can
intercept mail and confidential correspondence, search waste
baskets and garbage bins for sensitixe documents, convince
inde|H-ndent consultants and temporar) staff lo leak classified
material. ea\esdrop on employee conversations, make unusual
telephone information inquiries, and even sometimes Ik- hired as
employees.

I rauilsters also study institutions and businesses, ob.serving
and learning operational procedures. Acc(»rdingly, employees
should not respond to questions asked by third parties, no matter
how innocent the inquiry. (Criminals who know loo much al>out
u>ur customers affairs and are overly familiar with company
procedures are alwaxs a threat.

Ik' aware Never become a communications vehicle for a
Iraudsier Know your customers and reveal only relevant and
a|>propriale information to them. Always comply with company
procedures And alert those in authority when colleagues or
customers act suspiciously or if you have doubts at>out s|x-cific
business transactii >ns.

297

C:ONCLUSION

llwc livcil ii) a iHrlccl world, everyone wouki Ik (rii>iN\(>r(liy
aiul hardworking. companic.N would iuvlt he iklraiuk-d.
ciistoincTs would he honcM and honmirahlc. and polkv loivcs
anil Ncciiriu N|HvialiM> would nol he iKvtk'd.We ilo noi.howiwr.
live in a pcrkil wtirld

Hiisini'sscs ilo not comniil Irauil. nor do syxenis dishonoi
people d«». When iriniinaK ree«»gni/.e a llaweil or eareleN>
operation, they are quiek to eapitali/e on the resulting
ueaknesses. I'niortiinaiely. sicurily measures ha\e lin)ited s^ayin^
power Criminals stuiiy and rapidly evaluate them, estahlish their
laulis. and i|uiekly implement methoils ol delraudini* honest
eompanies.

(ionirolliiiK Iraud should Ix* in)|)ortant to all A proaetive
approach can considerahlx rciluce vulnerahilitx. 11 criminals
perceive that prevention and detection stratej;ies are in place,
they wilt Ix* less likel) to aitentpt to deiraud.

By reading l!-iTtRNATIONAL FRAUD ■ CAS IT AftEiT

YOL'/, you tiNi should Ix* ahle to detect Iraud KememIxT that
awareness, prevention aiul education are the stilutions to this
major concern oi };lohal contmerce.

^■ou are the eyes and ears ol y»»ur compan\. With
detenninalion, and a little eilort, Iraud can he managed - to limit
finaiuial losses - and to frustrate and expose the criminals that
viclimi/e us all.

298

IBSA

ilu- lnurnaiion;il Hanking Security AsstKiution (IBSA).
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299

Attachment 5

KNOW YOUR CUSTOMER POLICY STATEMENT

Money launderers need to enter the banking system in order to conceal the true source and
use of funds derived from their criminal activity. To do this, most money laundering
schemes utilize one or more of the many fmancial services offered by banks. Adopting a
prudent and reasonable KYC policy and promoting employee awareness is die most effective
way for a bank to avoid being unwittingly involved in money laundering. Since many
banks already observe formal KYC policies, ABA believes that a KYC regulation must
recognize this practice.

Accordingly, ABA believes that a "Know Your Customer" regulation must be consistent
with the following prindples:

1. Due to the varying sizes and types of fmancial institutions in the United States, any
appropriate KYC requirement must consider a direct relationship between die size of die
bank and the cost of compliance. The banker/customer relationship continues to evolve so
that "knowing customers" in the traditional sense is not always easily achievable.
Customers are generally very mobile, and large banks offer multiple banking locations
throu^out cities and states. Therefore, it is unrealistic to believe that banking center
employees will recognize or know all customers who conduct transactions at their location.
Transaction or account monitoring should be limited to high risk products. Finally, the
Treasury must acknowledge that modem banking services now result in less face-to-face
interaction between bankers and customers. A KYC regulation must be flexible!

2. As we have stated many times, a bank must review customer information regarding the
nature of the customer's business or account activity (i.e. household or personal account).
A bank should obtain and retain information appropriate to its business needs. Therefore,
heavy emphasis should be placed on identifying, verifying and retaining information on
new account relationships.

3. While this element must be flexible, bankers support a policy of taking reasonable steps
to verify the information provided by die customer in #2 above.

4. A bank will not knowingly accept deposits from or provide scnrices to customers whose
funds are derived from illegal activity.

5. A bank will not ignore indications that a customer's monies originated from illegal
activities. Banks will NOT make a consdous decision to avoid learning the truth.

6. The institution will quickly respond to known warning signals in a legal and
appropriate fashion. These signals need to be developed by die government as well as by
the bank.

7. Bankers realize the necessity of establishing an alliance with law enforcement and will
cooperate with law enforcement efforts to the extent that it is possible and legally

AMOVCAN MMCBIS ASSOCIATION'

300

permissible.

8. No KYC policy can be effective without extensive training diroughout an entire
institution so that there is employee awareness and strong procedures. The training must
be ongoing and include new and transferred employees, and covers both changes to
regulatory and statutory requirements.

9. There must be a system in place to test or audit the KYC policy. The type and size of
testing should be left to the discretion of the individual institution.

10. In order for U.S. banks to remain competitive in the global marketplace, banks should
not be required to build new systems other than as needed in the normal course of business
operation.

301

House of Representatives, Committee on Banking and Financial Services

Testimony from

Amaud de Borchgrave

Director, Global Organized Crime Project

Center for Strategic & International Studies (CSIS)

February 28, 1996

Four years ago, a wealthy American friend with excellent contacts at the top in Moscow
received a phone call from a prominent Russian asking him to take care of five Russians
coming to New York. When they got to his office, it soon became clear that all they wanted
was a banking introduction in Nassau where my fiiend also has a house. A week later, he
received a phone call from his Swiss banker in Nassau who asked him whether he knew
what his Russian friends wanted. "I assume they wanted to open a bank account," he replied.
"Yes," said the banker, "but do you know for how much?" "I assume a few million," my friend
replied. "No," said the Swiss banker, "it was for $2.5 billion." Zurich headquarters was
informed and the Russians were turned down.

Four weeks later, I found myself in the south of France sitting next to a Swiss banker based
in Monte Carlo. After I told him what had happened to my friend in New York, he
volunteered that he had received a Russian the day before who walked in without any
introduction and wanted to deposit $400 million. He also wanted to make sure that it would
be concealed through a variety of other offshore banking centers and would be totally
untraceable. This, too, was turned down by Zurich headquarters.

But these two incidents led me to the conclusion that something very big was taking place.
It was also the genesis of the Global Organized Crime project I launched and now direct
at CSIS. The project is designed to assess the dimensions of transnational crime, the nature
of the threat, and to make recommendations on measures for a muscular response.

The Project's Steering Group is chaired by Judge William H. Webster, the former DCI and
FBI Director, and is composed of some 30 prominent experts from the intelligence, law
enforcement and corporate security communities. It has spawned seven task forces
(composed of 150 members, each one highly rated in his or her field) that deal with money
laundering; counterfeiting; the smuggling of radioactive materials; the smuggling of millions
of illegal immigrants from east to west and from south to north since the end of the cold
war; narcotics trafficking; Russian Organized Crime; Asian Organized Crime; cybercrime
and information technology security; cyberterrorism; cyberwarfare, or infowar.

302

After 18 months on the job, there is little doubt in our collective minds that the dimensions
of transnational crime present a far greater international security challenge than anything
western democracies had to deal with during the cold war. Jim Woolsey, the former DCI,
who is a member of our Steering Group, could not have put it more succinctly when he said,
"We have slain the dragon of the Soviet empire, but we now find ourselves in a jungle filled
with a bewildering variety of poisonous snakes."

President Yeltsin, as we know, has called his own country, which still spans eleven time
zones, the biggest mafia state in the world, the superpower of crime. He has accused
officials of turning a blind eye to the criminal penetration of the MVD, the very
organization that is in charge of fighting organized crime. The collapse of the Soviet Union
also brought about a lethal mix of intelligence services, banks and organized crime.

I personally investigated -- and in many cases witnessed -- what Russian thieves-in-law or
mafia dons were doing all over western Europe, North America and Latin America.
Carrying $5 million to $10 million around in $100 bills in suitcases, they have been buying
choice properties for the past four years, all the way from Buenos Aires to Berlin, from
Marbella, Spain, to Monte Carlo, Monaco.

Mr. Jurgen Storbeck, the German Director of Europol, the nascent EU police investigative
unit (which does not have law enforcement powers), said recently, "there is a tidal wave of
cash of dubious origin being invested by Russians. Russians are now the most active in
buying up any assets on the European markets, including companies, office buildings, stores,
restaurants, clubs and so forth. Billions of dollars are being channelled each month through
such money laundering centers as Cyprus. No one is quite sure about how the money is
being made and where it's coming from. But we do know that much of it is obtained through
extorsion and other criminal activities." Tiny Cyprus, incidentally, receives 100,000 Russian
visitors a year - compared to 200,000 in the U.S.

Dr. Zbigniew Brzezinski, the former National Security Adviser, who also headquarters at
CSIS, estimates that Russia has taken in approximately $110 million from all western
countries, principally Germany, and international institutions during the past seven years.
Of that amount, he reckoiK that between 60% and 70% has found its way back to secret
bank accounts abroad.

There is a growing crisis of law and order over an increasingly large part of the globe. The
collapse of the Soviet empire led to a breakdown of the discipline generated by a fear we
no longer fear -- to be replaced by a new, largely unspoken, fear that the human being is
becoming redundant.

There are already 820 million unemployed in a world of 5.7 billion people. And with almost
100 million new babies a year -- 40 per cent of then born into the megaslums of the
developing world ~ and with an average age of 21 or less, we have entered an era of rising

303

inequities between nations and within nations.

There are also the haves and have-nots of the information age. In our banking sector alone,
some 450,000 employees will be laid off by the end of the century, displaced by
megamergers and by on-line banking which is expected to shut down half the branches in
the country. A new cashless society will have created a ready-made army of disgruntled
people, potential recruits as purveyors of inside information.

This is the global environment in which transnational crime, which knows no borders, has
carved up the planet into privileged sanctuaries of all manner of crime. The social and
demographic pressures driving transnational crime are little understood. Narco-demoaacy
is now part of our geopolitical jargon. The Hong Kong-based Chinese Triads, now spreading
all over China, and, through the Overseas Chinese, to the rest of the world, have forged
alliances with the Japanese Yakuzas, Russian syndicates, Colombian cartels and so forth,
and left national law enforcement agencies trailing from five to ten years behind.

Our GOC study has also established a direct correlation between the exponential growth
of transnational crime and the computer revolution. Traditional prerogatives of national
sovereignty have not only been challenged in cyberspace; they have ceased to exist.

But we still seem oblivious to how vulnerable information technology has made us. A former
computer topsider in the intelligence community told one of our task forces, "Give me $1
billion and 20 super-backers, and I can shut down America." A DoD colleague, upon hearing
the statement, said he could do it for $100 million.

In order to test the security and vulnerability of DoD's communication systems, the ASSIST
Center of DISA (Defense Information Systems Agency) was tasked to penetrate the
Pentagon's worldwide operations. For these mock attacks they did not use sophisticated tools
and techniques, but rather software available to anyone on INTERNET, such as SATAN,
R-BONE and ROOTIOT.

First, they were able to gain full user privileges of three per cent of computers through the
frontdoor. Then, by exploiting the relationship of trust of the three per cent, they were able
to penetrate 88 per cent of all targeted systems. 96 per cent of those attacks went
undetected. And of the four per cent who did realize they had been successfully attacked,
only five per cent reported the incident to their superiors.

Sub-state or non-state criminal actors are using the same methods. Although not verifiable,
briefers in off-the-record meetings, representing industry and govenunent, have told us that
at least 400 of the Fortune 500 corporations have been penetrated ~ and again only five per
cent were aware of the intrusion. In many instances, the objective was passive economic
intelligence collection, setting off fewer, if any, alarms.

304

We have no early warning capability in cyberspace. In mock information warfare scenarios,
we have seen that telephone signaling systems and switches can suddenly curdle, jamming
communications; that trading on the New York Stock Exchange can be paralyzed; that
automated teller machines can go haywire, crediting and debiting erroneous amounts at
random; that the Social Security System and its 1,325 field offices could no longer function;
that air traffic control centers, and railroad and shipping computers can be disabled.

The order of magnitude of transnational crime is staggering. Britain's National Criminal
Intelligence Service has a rough guesstimate of $1.3 trillion for annual global money
laundering ~ an increase of $300 billion on their previous annual estimate. NCIS receives
some 12,000 confidential money laundering tips per year from public-spirited citizens. But
not one of these tips led to a conviction. Evidence simply vanishes in cyberspace in
nanoseconds.

PDD-42, issued by President Clinton last October, was designed to come to grips with
transnational crime and money laundering. It is at least a begiiming. But it is woefully
inadequate in that it assumes that we can negotiate the closing of some 50 major money
laundering centers that span the globe -- many of them tiny island nations ~ and, if
unsuccessful, punish them by taking them out of the U.S. financial loop. There is no such
loop. It is now a global one, but law enforcement still has to stop at meaningless borders.
The Seychelles will give anyone depositing $10 million a diplomatic passport ~ i.e., immunity
from prosecution. A St. Kitts passport can be had in return for the purchase of a $150,000
condo.

The world's leading financial policemen are only now getting around to "considering"
targeting money laundering from arms trafficking, extortion and bribery, as well as the drug
trade. Members of the Financial Action Task Force, which groups officials from the
European Commission in Brussels, the six member countries of the Gulf Cooperation
Council, and 26 other countries ~ for a total of 47 nations -- have launched a review of
"guiding principles." This review will be completed in June. Hopefully, it will result in the
criminalization of money laundering linked to any serious crime.

The Task Force's current recommendations, based on the lowest common denominators
among the member states, only require the criminalization of drug money laundering. The
inclusion of all serious crimes could make it simpler for law enforcement officials to launch
investigations that look suspicious, but have no obvious drug links. The review is not
expected to result in big changes to the 40 principles currently recommended by the Task
Force. Yet, in our opinion, these changes are long overdue.

The review will also have to consider whether to address new issues raised by the
development of "cybercash," new payments systems such as stored value cards or electronic
wallets. Ronald Noble, the outgoing Undersecretary for Enforcement at Treasury and

305

chairman of the 47-nation Task Force, said, "We have to be concerned as an organization
to come up with principles which recognize that technologies could pose a threat but do not
define them in such a way that you are dated as soon as you publish them."
Law enforcement officials feel strongly that the developers of new financial technologies
should think about their criminal potential before they launch them, so that governments
do not have to clamp down on them afterwards with draconian rules. Safeguards now being
discussed against the misuse of electronic stored value cash cards could include limiting their
maximum value or restricting their use to certain closed systems.

The professionals on our own CSIS task forces believe that electronic financial crimes are
now the principal threat to the world's financial infrastructure. We are facing a new breed
of transnational criminals with hightech methodologies.

Individuals and corporations are only dimly aware of the risks. Vint Cerf, the father of
Internet, predicts that before the end of the century, some 200 million computers (vs. 40
million today), and some five million global networks (vs. 85,000 networks today), will all
be linked to the 'Net. Internet's World Wide. Web sites are now doubling every 53 days.
Electronic commerce is expected to reach $3 trillion a year in four years time when on-line
banking will become the norm, and checkbooks the exception.

America's real assets are in electronic storage, not in Fort Knox, including most ot its
proprietary and intellectual property. And in this global electronic environment, there are
no cops to protect you, yoiu- assets or your secrets, or your reputation in personnel or court
records that can be doctored by remote control. As "60 Minutes" demonstrated last Sunday,
transnational criminal gangs are now routinely stealing the identities and retirement
accounts of American citizens.

We all know that successful counterfeiting is also a global plague. If 14 out of 15 French
banks -- forewarned that it might be a forgery - guaranteed the authenticity of a $100 bill,
we know that the superbill is not a journalistic fantasy. Russians now hold tens of billions
of dollars in $100 bills. About $100 million in $100 bills is shipped daily to Russia where
they are bought for rubles. Topic A among Russians these days is what the new $100 bill
will do to their hoard of old bills. The U.S. Embassy hot line tells them they have nothing
to worry about, that the old bills will be vahd tender for the indefinite future. But there is
no question that regimes such as Iran, Libya and Iraq have a vested interest in destabilizing
confidence in the dollar. They have also been using counterfeit dollars for subversive
purposes. The global reach of the superbill is yet another example of how law enforcement
and intelligence have no alternative but to pool ~ not share ~ their resources.

What does CSIS hope to do about Global Organized Crime? First of all, there is no central
clearing house for information about activities in all fields of transnational crime. CSIS has

306

collected and continues to collect this information from a wide variety of sources all over
the world.

Our mandate is that of a catalyst to raise the level of awareness that hopefully will provide
the building blocks for the kind of hightech transnational cooperation and legal structures
that are essential in order to level the playing field between law enforcement and
transnational crime syndicates.

Countries under attack, including all the democratic nations of the world, have no choice
but to pool their resources to create the kind of countervailing force that transnational crime
syndicates will have to take seriously.

Until that happens. Global Organized Crime will continue to supplant national entities and
undermine the world's financial infrastructure.

######

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Qiffbrd L Brody Associates, Inc

Written Testimony

orQifTord L. Brody, President of Qiflbrd L. Brody Associates, Inc.,

Washington, D.C.,

before the Committee on Banking and Financial Services

of the House of Representatives, en the Threat Presented by the Activities of

Organized Russian Groups, Banks, and the Russian Government

to the International Financial System.

February 28, 1996

Mr. Chaimian, Rqiresentative Gonzalez, Members of the Committee, my name is ClifTord L. Brody. I am
President of Clififord L. Brody Associates, Inc. a bank marketing and electronic banking consultancy based in
Washington D.C. I am pleased to appear before you today to testify on the threat of organized crime to the
international financial system and, if I may add, to the domestic banking system of the United States.

I bdieve that Russian banks and the Russian government play a major role, often an active role, and thus bear
major responsibility, in contributing to the growing problem of laundering of U.S. currency.

I also believe that the U.S. Government should take specific steps to counter these activities, and that it can —
without compromising its goal of diminishing the threat of Russia's returning to its role as super-power adversary,
or rebuilding its cold war nuclear arsenals.

I therefore make the following recommendations.

• First, that Congress attadi a careflilly worded, concise requirement to targeted appropriations legislation,
requiring the U.S. Government to negotiate and then confum specific and effective Russian Government
action to improve its bank si^iervisocy fimctions in order to diwart illicit Russian bank activities, and that
securing a timetable for specific improvements by Russia be a prerequisite for continued funding of U.S.
technical assistance to Russia's financial sector, or any technical assistance, targeted to investment in
individual Russian banks and their back room processing, from multi-lateral institutions like the World
Bank or European Bank for Reconstruction and Development,

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Qifford L Brody Associates/ Inc

• Second, that Congress urge the Executive Branch to secure agreement from the Russian Government to
make available to legitimate U.S. banks the approved list of Russian companies authorized to maintain
deposit accounts outside Russia,

• Third, that Congress secure, ideally through informal discussions with the Executive Branch but with
legislation if necessary, a fum commitment from the Executive Branch to act in concert with other
governments, and a similar commitment from the Federal Reserve to act m concert with other central
banks and the Bank for International Settlements, to negotiate agreement among OECD governments
and central banks that so called stored value cards generally be limited in their function so as to pre-empt
any opportunity for Russian (or any other) banks systematically to use electronic cards to bypass any
OECD country's effective control over its currency and money supply, and

• Fourth and most importantly, that this Committee work closely with the domestic U.S. banking industry
to decide on the necessity for legislation definuig whether "bearer" stored value cash cards should be able
to contain unlimited amounts of cash without some form of electronic stamp indicating where large
money balances on such cards came from, and who they belong to.

My perspective in these matters is shaped by my professional experience and, of course, my personal bias.
1 have been a United States diplomat specializing in East-West matters, serving m Washington and in Europe
for 14 years from 1966 to 1979. Since leaving government, I have served as a consultant to most of the larger
money center and regional U.S. banks, and as advisor to several large banks, high technology firms, and
multinational consumer goods companies expanding into Central Europe, Eastern Europe, and countries of the
former Soviet Union, notably Russia itself

In the period from 1990 to 1994, my firm either advised or represented Citibank, Avon Cosmetics, Hearst
Publications, AT&T, Hewlett-Packard, HJ Heinz, Cabletron, and several smaller firms in specific business
matters in Russia. In each instance, our client's goal was to achieve a satisfactory return on the heavy investment
required for opening business operations there. Our scope of work in each case was to negotiate with Russia's
Central Bank, commercial banks, or state-owned banks as circumstances warranted to assure that our client's
business interests, contract relationships, account balances, or operating licenses would be properly respected and
treated fairly

My firm also entered into agreements with First Data Corporation, US West, and several other major firms
to work with emerging Russian commercial interbank clearing systems to improve electronic funds transfer
operations among Russia's private sector and state owned banks. In addition, my fum located and helped
negotiate multi-year project financing from non-Russian and Russian commercial banks for housing construction
desperately needed by the US Embassy in Moscow to house U.S. diplomats.

My firm also had became known to the largest Russian banks and the Russian equivalent of the American
Bankers Association ~ namely, the Russian Bankers Association -- as a potential supplier of technology for
making needed repairs to Russia's interbank clearing system. The Russian Bankers Association in particular
urged my company to approach the Central Bank of Russia on this subject, which it did in 1992

Subsequently, with the sponsorship of several major U.S. technology firms, my firm sought out the National
Automated Clearing House Association, NACHA, the U.S. self-regulatory organization (SRO) umbrella group
whose membership includes over 400 of this country's most active electronic payments systems operators and

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Qifford L Brcxiy Associates/ Inc

participants ~ including all major banks and several agencies of the U.S. Government like the Social Security
Agency and the Department of the Treasury. As you may know, NACHA sets the standards for encoding,
security, and transmission of all electronic fiinds transfers (EFT) in the United States, including those involvmg
SSI, VA, and other direct deposits, virtually all private sector direct deposit programs, and most company to
company EFT as well.

The avowed purpose of my firm's seeking die guidance of NACHA was to respond to a specific request fi-om
the Central Bank of Russia to my firm, in the Fall of 1992, to provide expert technical assistance to the Central
Bank for modernizing the hopelessly antiquated interbank payment system inside Russia.

By 1992, for reasons too complicated to summarize here, Russia's interbank payments system had become
so ine£5cient and leaky that on a daily basis, interbank transfers by the thousands simply were getting lost, while
millions of other paper transfer slips confirming interbank transactions were being stored in several rooms in
a building in Moscow, left there to rot. At the same time, anyone with even a first generation IBM PC could tap
into the rudimentary electronic interbank dealing system then in place and literally create money transfers out
of nothing — effectively printing money without a printing press.

The Central Bank of Russia said it knew this was happening, and that it wanted to put a stop to it.

For ethical as well as practical reasons, we pointed out, the adoption inside Russia of modem interbank
clearing and settlement procedures and technology made sense only if the Central Bank of Russia itself were
determined that the system operate according to the same high standards that today in every OECD country
already govern interbank payments, clearing and same-day settlement of accounts at the central bank. Otherwise,
technology could and likely would be used by at least some interbank payment system participants ~ including
banks ~ for ilUcit as well as legal activities.

Only when the Central Bank of Russia confirmed in writing to us later in 1992 that it wanted its interbank
system to comport with BIS standards did we agree to move forward. The Central Bank then formally requested
that my company, others, and NACHA bid on its interbank payments system modernization project, which we
did.

The government agencies that have testified eariier today have spoken of the general threat of organized crime
to the international banking system. Several have spoken about the threat to our domestic banking system as
well. They have spoken of the dangers inherent in the organized groups that are becoming more and more
technologically efficient, able to move huge sums of clean as well as dirty money in nanoseconds, without law
enforcement agencies or honest bankers having much chance of knowing for sure who they are dealing with.

These agencies represent a govemment - the U.S. Government - trying its best to keep the dirty players out,
something my firm heard the Russian Central Bank say it wanted to do, too.

Alas, the words did not fit with the deeds. For, in the process of organizing the bidding consortium widi
several U.S. companies and NACHA, preparing volumes of bi-lingual terms of reference and bidding documents,
competing intensely for the contract, winning it, and receiving a Letter of Litent fi-om the Central Bank to
consummate the contract, the real deal was put to me m no uncertain terms by a senior Central Bank official in
May, 1993, when I came to Moscow to sign the actual contract.

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Qifford L Brody Associates^ Inc

Look, Mr. Brody, he explained. All these standards and rules that you use in the United States are very nice.
But what we really like is this little slice of software -- he pointed to a single box in the complicated diagrams
and technical narratives that our consortium had provided -- effectively singling out new technology that had
resulted from more than five years of R&D by one of our consortium of bidders. This technology, he said dryly,
may seem to you to be a very small item. To us, it is big. We have everything else your consortium is offering,
and we really do not want to buy any of it. But, tapping his finger on that little diagram, he went on: we don't
have this, so name your price, Mr. Brody. We'll pay you anything for it!

I've seen a lot of dirty dealing in my life. It's quite something else, though, when someone senior at the
Central Bank of one of the most powerful countries in the world asks you to help it with software piracy. I
walked out.

Alas, inside Russia today, within the country's central bank, within its huge state owned banks, and among
almost all of its large and not-so-large private sector banks, you can literally buy your way into the interbank
payments system and use it for just about any purpose you want.

If you are a clean player, you can transfer your money domestically inside Russia to one of the banks
connected directly to SWIFT, and then have your money efficiently wired anywhere in the world. If you are a
dirty player, you can do the same No one checks where the money has come from, what balances have been
hidden from the government, or what the funds are meant to do.

It is not a system in which there just happens to be a larger-than-usual bunch of bandit banks. Rather, there
is simply no effective enforcement of banking supervisory rules over and above a rather elemental reserve set-
aside program, based on a simple accountant's audit, that the Central Bank notches up or down as macro-
economic circumstances seem to warrant. There is no effective reporting system for money laundering, nor even
a modem set of rules in place requinng one. There is no modem examination system, few real examiners, and
no document filing systems to signal to central authorities when inordinate amounts of hard currency is deposited
or withdrawn, or even if hard currency balances actually exist.

Banks comply with some existing Central Bank reporting requirements by declaring only some of their own
balances, keeping the rest off the books by shifting them among their clients. The banks then become active
partners helping corporate and high net worth individual customers sidestep their own nominally required
reporting to various ministries. Often this happens because the banks themselves are substantial equity holders
in the very companies whose accounts are maintained at the banks, and whose own interests are therefore better
served by hiding the truth of their customers' wealth.

Russian companies, in tum, simply keep fiuids on deposit outside the country, either illegally (under Russian
law) in their own accounts or in legally-held off-shore accounts of other companies that lend out the account
faciUty to others - for a steep price. These companies then send middlemen to the United States, shopping for
domestic U.S. companies willing to receive wire transfer payments from these accounts for bogus services, draw
out cash, and give it to other Russians when they travel here.

My firm was approached more than once and asked to participate in precisely this kind of scam — in one case
by a Russian who had been traveling to the United States repeatedly on grants from the U.S. Agency for
International Development. We were even asked in New York City, by representatives of a huge Russian state
owned enterprise, to be the systems integrator for hardware, sofhvare, and transaction processing that would have

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Qifford L Brody Assodates, Inc

allowed the company in question to pay its employers and suppliers through accounts accessed by debit cards
issued to them^ At fiist, it sounded like a great idea. Then I asked how the company planned to gain what I knew
to be required pre-approval &wn the Russian Central Bank to operate a local card system and tap the interbank
system for ongoing fimds to redistribute to cardholder accounts I was told flatly that the factory had no intention
to do so. Instead, it wanted a system that it could use to create its own rubles. Not scrip. Rubles

Were it 1992 ri^ now, Mr Chairman, and were we talking today about a Russia just beginning to emerge
fiom the shackles of single-party communist rule, we could perhaps take comfort that in its first steps towards
a true free market economy, we were likely to see these kinds of improprieties.

However, we are now four years into a massive program of bilateral and multilateral loans and grants from
the United States, other OECD countries, the World Bank, the EBRD, and the IMF, amounting to more than $ 1 00
billion, where the government of Russia has had opportunity after opportunity to take control of its own destiny
and impart to its economy and commerce a baseline of acceptable banking and business practices.

Russia simply doesn't want to.

In a country supposedly in desperate need of a $10 billion IMF loan over three years, there is anywhere fit>m
$70 to $100 billion on deposit outside Russia belonging to Russian owners With notable individual exceptions,
neither at the Central Bank nor anywhere else in the Government of Russia is there an official thirst for instituting
a system of legal, business, or banking practices that could comport with those in place here or elsewhere among
highly developed economies. In its place, there is only bribery. Lots of it.

One hears splendid talk, to be sure, about how the system in Russia could be fixed. In the land that gave us
Dostoyevsky, how could there not be hundreds, indeed thousands of pages of intellectually fascinating draft rules
about banking regulations, coiq>led with the most elegant discussions among Russian central bankers, commercial
bankers. World Bank advisors, the IMF, and consultants from the European Bank for Reconstruction and
Development about ways the system should be repaired.

There are also a few senior people inside the Central Bank of Russia who yearn for propriety and honesty
in the system. I have met them Their motivation is first and foremost the pride they have — and want to have -
in their own country, and the desire to see themselves and be seen as members of an international community of
regulators working in concert to improve the international banking system and keep dishonest players in check.

Unfortunately, what prevails in Russia today is an attitude of official laissezfaire coupled with an "I want
my share too" mentality fnxa the top to bottom of government. It is a system without effective laws, no less law
enforcement, and a population of officials inside the Central Bank and the Finance Ministry who think the rules
offair play and honesty in banking that you and I might talk about are sheer lunacy. Not luxuries. Lunacy, with
no place in the real world that Russia has been for a very long time.

The result is a banking free-for-all, where the banks inside the country do what they want ~ including bribing
their way in the door at the Finance Ministry itself to get in line for new state credits to bail out borrowers that
cannot pay old loans coming due. Some of the insider dealing would make even Charles Keating blush.

When western investors, bankers, visiting Members of Congress, or expert teams from the World Bank or
EBRD or US AID meet with them, most of these bankers will mouth the rig^t words. And the banks' premises

L. .__

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Qifford L Brody Associates^ Inc

sure do look spi£Ey. But behind these splendid facades, the vnW is simply not anywhere to be found among
commercial banks or the Russian government to play by internationally accepted banking rules. Instead, the
passion is there only to find the best technology anywhere to move money to where it will make the most raw
profit.

Indeed, the business plan of most Russian banks can be summed up this way: use the best technology there
is to accumulate dollar balances from home and abroad, lend as much as you can locally mside Russia for three
to six months at rates of 40-80%, move any remaining balances outside the country on the bank's own account
or wherever depositors want, leave them on deposit at banks large and small in European and Asian capitals, earn
nominal interest, wait for customer instructions on where to move balances next, don't ask questions, and charge
hefty fees every step of the way. To the recipient banks in Europe and Asia, these deposits are quite the gift --
low cost deposits that can then be lent out at very attractive spreads.

The reason more balances don't show up in the United States in quantity is not because our laws are that
much better than, say, in Europe, and instead because most U.S. banks do a very fme job of watching where
deposits comes from. This imperfect line of defense, this complex balance of laws, regulations, banking practice,
and things we believe in, are ultimately reflected in that banking rule of rules - "Know Thy Customer."

All Russian banks - all of them - live fi-ee from any equivalent form of self policing. They don't care who
their hard currency customers are. Instead, Russian banks realized in the early I990's that it would not take much
to comer the market for laundering money, and that it would be very lucrative if they did. They also realized that
with the nght technology, they could do it efDciently and make a lot of profit doing so. They have become simply
the most systematic, efficient, and intense in attracting illicit dollar and other hard currency balances — no
questions asked. They are also the most eCGcient in redistributing these balances all around the globe.

There are two ways this Committee can deal with this serious problem. One is to address existing patterns
of money laundenng. The other is overcoming the ominous new threat of money laundering when electronic
commerce and the use of electronic money ~ cybercash — becomes the norm.

I do not believe it necessary that new laws be passed, or even that new regulations be written, to deal with
the current threat fi-om Russia. The United States does not have the extraterritorial reach into Russia to make
U.S. laws stick, nor is there very much interest among banks or the official community mside Russia to enforce
equivalent rules of their own.

Instead, the United States Government needs to be creative, assertive, and above all practical. Right now,
the Central Bank of Russia issues licenses authorizing companies inside Russia to maintain deposit accounts in
foreign countries. It keeps a current list of who has those licenses. Through the Bank for International
Settlements, by direct bilateral discussion between OECD countnes and the Government of Russia, or by some
other official means, an agreement can be reached -- if the United States assets leadership — by which banks
outside Russia could confirm with the Central Bank of Russia that funds being wired from a Russian owner to
a bank anywhere outside that country were in fact legally being put on deposit outside Russia.

It is not farfetched even to think that the Central Bank of Russia could put its list of approved account holders
on the World Wide Web - allowing access only to authorized commercial banks.

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Qifford L Brcxly AsscKJates, Inc

The real duillenge is pressing the Russian Government and Central Bank until it agrees to make this possible
It may not be as hard as it seems. At least one senior official from the Central Bank told me two years ago that
the Central Bank would be amenable to coordinating this way, but that there were no takers from among the
dozens of U.S. government oCTicials with vAom he had met about this - high-level officials from many of the
agencies that testified here earlier today. If our government wasn't prepared to take up the offer then, it should
now.

Governments in Western Europe also have known of this option for a long time. A few correctly argue that
they do not want to appear to be in bed with Russian law enforcement authorities, especially if those authorities
can and often do act with capriciousness in defining who a bad guy might be. I agree completely. But it is a far
cry from collaborating with Russian law enforcement merely to empower legitimate commercial banks, before
accepting deposits that appear to have Russian ownership, to check a list of those Russian companies that can
legally hold hard currency outside Russia.

The acid test, of course, is whether in these times of nsmg political sentiment mside Russia against reforms
of many kinds, the Central Bank will make that list available - and whether it will do so without requiring that
the bank checking the list say why it is doing so. It is not worth the investment either of time or political capital
for Congress to pass a law about this. But there should be a paragraph makmg financial assistance to Russia
cooditianal en our government getting the Russian Central Bank, and Finance Ministry if necessary, to go along.

The real problem, Mr. Chairman, is getting US diplomats to press for a solution vihose details they
apparently do not understand, and therefore cannot defend when facing reluctant Russian counterparts who also
may not understand the technical issues. The Federal Reserve does not suffer from this lack of understanding:
the Committee ought to explore whether the Federal Reserve can and should generate interest among other OECD
central banks to use their powers of persuasion collectively to get the Russian Central Bank to go along.

I want to turn now to legislation that this Congress may well have to pass, Mr. Chairman. Given how long
it takes for legislative language to become law, and the sustained investment in time and political capital needed
to build an effective consensus with the banking industry and regulators for statutory language that achieves what
is intended, the Committee should begin work now, without delay.

I am speaking here of legislation that preserves for governments the exclusive franchise of creating and
printing money, and assures that as technology advances to allow citizens to use portable electronic forms of
money, govenunent does not cede its actual power to create money to organized crime, money launderers,
counterfeiters, tax evaders, or even by accident to honest people.

Right now, legitimate commereial companies and banks are investing extraordinary sums and working seven
days a week to carve out an extraordinary franchise ~ literally the placement of multiple accounts on so called
stored value cards. These stored value cards — people often call them smart cards ~ will eventually be as
commonplace as regular plastic debit and credit cards are nowadays.

These cards will work in one of two ways. One card might carry information and spending power from
multiple accounts clearly identified as belonging to the specific card holder. Or, it would carry real money
downloaded onto the card in electronic form that can be spent electronically by whomever has the card in hand.
It will be technologically possible for one card actually to do both, and the best ones will.

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With the first kind of card, consumers will be able to access what is theirs in the way of their own money or
other vital or valuable personal data stored in a money, credit, or information account somewhere. The one card
will let them tap these multiple accounts at home, on the job, in stores, and just about anywhere else for
transactional, medical, educational or other purposes — all with extraordinary convenience and safety.

Much of the private-sector planning for consumer and business use of these smart cards centers on marketing
this multi-account functionality, and limiting the holder's spending to what the person has in his or her various
bank or consumer loan (e.g. credit card) accounts. Save for the fact that multiple accounts will be included on
the same card, these cards would work the same way ATM or credit cards do now: swiped at the point of sale with
confirmation received from the account issuer via an on-line dial-up connection before the transaction is
permitted.

A pure bearer stored-value card ~ a so-called cash card — will be different, in effect substituting literally for
actual coin and banknotes. Much like a dollar bill, he who held it could spend it. It would be honored no matter
who held the card or where it was presented. There would be no point-of-sale confirmation. Once the money
inside the card were spent, the same card could be refilled with more.

Much of the convenience these bearer cash cards will offer to merchants will be in eliminating the expensive
per-transaction dial-up verification process so commonplace in stores today. Instead, the card bearer or store
clerk will plug the card in to the cash register, and if there's cash value in it, the customer will be able to buy the
newspaper, with the purchase price and tax deducted from the value on the card, just as happens today when you
use fare cards on the Metro.

This type of card is ideally suited for the huge volumes of low-denomination transactions that would
otherwise be prohibitively expensive to process electronically if the merchant had to perform verification through
on-line systems - as happens today.

Bearer cards issued by Mondex, a company in Europe, are already being used on a trial basis in a town in
England in just this way. There is anecdotal evidence that consumers, though understanding the logic of these
cards and the convenience they are supposed to offer, question whether they want bearer cards that can be lost
or stolen, and then spent by someone else. While it is too early to say how readily the marketplace will accept
these cards, Mondex believes that it is a marketing problem to get consumers to go along, not a technological one.

I believe that the Mondex model will not succeed commercially. Instead, banks and card issuers will succeed
in fmding the right mix of specified card-holder accounts ^/u5 the bearer - refillable money capacity to include
on one card. Marketed correctly with built in security features, this combination card will meet with consumer
acceptance in sufficient numbers to make it commercially lucrative.

The question is, what must be done to make sure these cards cannot be systematically exploited by highly-
organized teams of financial institutions already intent on laundering money using high technology?

It is inevitable that bearer stored value cards or combined personal account / bearer stored value cards will
be lost or stolen. Some will only be drained of the money stored on the card and then thrown away. But without
some form of protection, others will be used specifically as transfer vehicles to store extraordinary amounts of
money that then can be carried inside a wallet from country to country and used to launder funds. Or, bearer cards
will be cloned outright

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Clifford L Brody Associates, k)c.

If cloning were to happen, counterfeiting would be only one of the real problems on our hands. Real if ill-
gotten funds on deposit in Country A could be put on a single card which then would be carried to the United
States, where the card could be drawn down or offloaded onto cards carrying denominations of, say, $500. That
second tier of cards could then be smurfed through home banking systems into a master account, with no one the
wiser. A bearer cash card with a million dollars stored on it could be flushed electronically in $500 increments
to disbursed accounts, at ten transactions a second (very slow by today's standards), in less than 5 minutes. It
would make no difference if laws said that a single card could have no more than $ 10,000 on it; the value on the
"illegal" $1,000,000 card couM simply be dumped into 100 "legal" cards of $10,000 each, or 1000 cards of
$1,000 each.

It could be that simple, with the whole process automated on one PC. Therein lies an interesting future for
organized Russian money launderers — and any other money launderer for that matter. CTRs and "Know Thy
Customer" would no longer make any difference.

Contrast this with matters as they are today. Regardless of what form they have, aggregated sums of money
today, other than actual piles of banknotes, always carry the name tag of an owner. Launderers have to take pains
to falsify the names of tiiose owners, by putting many layers between the true owners and the nominal owners
of ill-gotten money. This is essentially the laundering process. The very fact of its built in inefficiencies -- the
necessity to have these layen - is also the sole reason why law enforcement agencies have at least half a chance
to discover what is going on.

If bearer fonns of refiOable money cards are allowed to circulate without any real limit on Itow much spending
power can be put inside any one card, this one last defense against wholesale electronic movement of ill-gained
money will fall away. In its place will come a tailor-made opportumty for organized crime, and banks organized
to stqjport it, to use the highest fivms of available technology to marshall these cards in ways that will avoid any
detection at all.

Arguably, Congress couM simply stay on the sidelines, let consumers make the choice, and hope for the best
Will consumers accept single-purpose bearer money cards and their attendant risk? Will they opt solely for smart
cards widi their own accounts that take the identity features and protections already built into present credit cards
to new levels of electronic security?

I beUeve that they will opt for a combination card. If I am right, the better course for this Committee is to
begin discussions now with the domestic banking industry to defme whether there should be statutory language
defining where the balance shoukl lie between real convenience to the customer - something I want as a consumer
~ and a situation in which stored value cards can be used to contain and transfer unlimited amounts of money.

It is too easy simply to say that any statute on this subject should require that all forms of stored value cards
be allowed so long as they attach specific idoitity to the values stored on the cards that can be confumed at the
time transactions are made. It does not make sense to give up the real cost savings to consumers, merchants, and
banks alike from my being able to store $50 on my card, and from the merchant's ability then to accept it for my
son's 50 cent purchase of a candy bar. Why should the merchant have to keep an expensive on-line terminal
always at the ready for something like that?

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Qifford L Brody Associates, Inc

Put differently, do I care if a card with a stored value of one dollar points to the owner? Probably not. Do
I care if a card with one million dollars does. I probably do. Does Congress need to sit down with industry and
work out where the threshold lies and how to incorporate it into these cards? Yes it does.

If the consensus then points to the necessity of a statute, its drafting will clearly require the cooperation of
the Treasury Department, the Federal Reserve, and the knowledge of the very companies, banks and industry
groups that are developing the technology. If written badly, it is a statute that would dangerously interfere, as
it must not be allowed to do, with the extraordinary and beneficial development of stored value cards meant to
be tied to bank accounts, credit accounts, medical records, government benefits, library accounts, medical or
dental records, frequent flier miles, allergy data — information that when stored on a single card for immediate
access could provide wonderful and even life-saving benefits to real people, and create substantial job growth
at the same time.

We will see the first of these cards introduced by banks for use in Atlanta, during the Olympics later this year.
We should watch carefiilly how they work, and what customers think of them. It then will become easier for
banks, the bank regulatory agencies, and Congress working together to gear their thinking to what most customers
seem to want — security and safety for their money — and then perhaps to set a threshold below which amounts
of pure cash stored on a card is acceptable.

I ask the Committee to keep in mind that the business goals of these banks are right on the mark: to deliver
real benefit, better customer service, all at a lower cost, by tying one single card rather than a whole wallet-full
to a person's bank accounts, credit accounts, medical records, government benefits, library accounts, dental
records, SSI benefits, fi-equent flier miles, allergy data, and the like.

Congress ought to want these banks to succeed at achieving each one of these goals, which I believe it does.
By the same token. Congress ought to accompany the development of bearer cards widi discussion with the
industry on how to build in common sense, technologically-driven features limiting the amount of cash on the
card, or identifying the origins of large denomination stored card balances.

Otherwise, the United States risks losing effective control over dollars in circulation, and even the creation
of money itself, to money launderers around the world. At least some of them will be Russian.

I am prepared to answer any questions you may have.

317

318

CREDIT

T CONTMUED FROM IB

aparUnent in Queens in Septem-
l)er, they found thousands of bogus
creiitt cards along with the equip-
ment to manufacture them, Mans-
field said.

Zupaoc told CBS that thieves
tried to drain her retirement ac-
count at the Mayo Clinic and her
daughter's college fund. But Zu-
pane managed to halt the outflow
of money before any was lost.

"I've been told by postal inspec-
tors over and over again that this
will go on for years," Zupanc said
on 60 Minutes. "They have my
identity, yes, and it is scary. It is
very scary. And they have my
daughters' names."

Postal officials said fraud based
on stolen financial information is
a growing problem. But officials
insisted It is not strictly a postal
problem.

About 1,000 fraudulent change-
«f-address forms are submitted to
the Postal Service each year, said
Paul Griffo, spokesman for the
U.S. Postal Inspection Service,
'About 3,000 bogus change-of-ad-
dress forms are submitted directly
to financial institutions each year,
Griffo added.

An even larger number of credit
cards and bank statement are sim-
ply stolen from peoples' mailbox-
es. In Minnesota, there are about
5,000 mailbox thefts each year,
said Wanda Krueger, a postal in-
spector In St Paul.

Zupanc and "60 Minutes" sug-
gested a relatively simple solution
— require anyone suomitting a
change^f-address form to show up
in porson and present a picture
Identification card.

Sandra Harding, spokeswoman
for the Postal Service, said, "We
arc looking at several aUernative
solutions" to address the problem.
But she would not reveal what
alternatives are under consider-
ation,

The Postal Service already
sends verification letters to a mail
customer's old address each time
a change of address Is ordered.
But Harding -admitted that the ex-
isting veriflcaUon system can be
defeated by thieves.

Qrlffo said the most sophisticat-
ed thieves can forge Identity
cards.

Zupanc also told "60 Minutes"
that postal inspectors told her they
knew the Brooklyn mailbox was a
fraudulent operation.

319

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS : CRIMINAL TERM

THE PEOPLE OF THE STATE OF NEW YORK

-against-

OLUSHINA GODWIN ADEKANBI

a/k/a "SHINA", a/k/a "GODY"

PRINCE DELE OSIBOTE

ROTIMI OGUNNUSI
a/k/a "ROY"

MICHAEL ATAMOLOGUN
a/k/a MIKE ODEKU

EirrBSPBXBE COSBOVTZOM
SPECIAL mrORIIATXGN
C.P.L. 200.65

IHDZCniEIIT MO.: 4355/95

Defendant (s)

The District Attorney of the County of Queens by this Special
Information attests that he has reviewed the substance of the
evidence presented to the Grand Jury in the above-entitled matter
and concurs in the judgment that the charge of Enterprise
Corruption in violation of Penal I,aw Article 460 is consistent with
the Ijegislative findings contained in said Article.

Dated:

Kew Gardens, New York
January 31, 1996

A. BBOm
I DISTRICT ATTORmy

320

EIGHTH ADDITIONAL GRAND JURY

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS CRIMINAL TERM

THE PEOPLE OF THE STATE OF NEW YORK

-against-

OLUSHINA GODWIN ADEKANBI

a/k/a -SHINA", a/k/a -GODY"
PRINCE DELE OSIBOTE
ROTIMI OGUNNUSI

a/k/a "ROY-
MICHAEL ATAMOLOGUN

a/k/a MIKE ODEKU
SAMUEL ADEWALE
MARY OYETUGA
OLANREWAJU ADEYEMI

a/k/a FLORENCE JAMERSON
AKINDELE OSHODI

a/k/a -NIYI"

FILED:

INDICTMENT N0.:4355/95

SUPERCEDES NO.:4203/95

Delendant(s).

PL460.20(1)(a)

ENTERPRISE CORRUPTION (1)

ADEKANBI. OLUSHINA GODWIN
OSIBOTE. PRINCE DELE
OGUNNUSI, ROTIMI
ATAMOLOGUN, MICHAEL

CONSPIRACY FIFTH DEGREE (2)

ADEKANBI. OLUSHINA GODWIN
OSIBOTE, PRINCE DELE
OGUNNUSI. ROTIMI
ATAMOLOGUN. MICHAEL
ADEWALE, SAMUEL
OYETUGA, MARY
ADEYEMI, OLANREWAJU
OSHODI, AKINDELE

PL 190.65(1)(a)

SCHEME TO DEFRAUD IN THE
FIRST DEGREE (3)

ADEKANBI, OLUSHINA GODWIN
OSIBOTE, PRINCE DELE
OGUNNUSI, ROTIMI
ATAMOLOGUN, MICHAEL
ADEWALE, SAMUEL
OYETUGA, MARY
ADEYEMI, OLANREWAJU
OSHODI, AKINDELE

321

PL 155.40(1)

GRAND LARCENY IN THE
SECOND DEGREE (4-a)

ADEKANBI. OLUSHINA GODWIN
OSIBOTE. PRINCE DELE
OGUNNUSI. ROTIMI
ATAMOLOGUN. MICHAEL
ADEWALE. SAMUEL
OYETUGA, MARY
ADEYEMI. OLANREWAJU

GRAND LARCENY IN THE
THIRD DEGREE (9-34)

ADEKANBI. OLUSHINA GODWIN
OSIBOTE. PRINCE DELE
OGUNNUSI. ROTIMI
ATAMOLOGUN. MICHAEL
ADEWALE. SAMUEL
OYETUGA, MARY
ADEYEMI. OLANREWAJU

PL 155.30(1)

GRAND LARCENY IN THE
FOURTH DEGREE (35-45)

ADEKANBI, OLUSHINA GODWIN
OSIBOTE. PRINCE DELE
OGUNNUSI. ROTIMI
ATAMOLOGUN. MICHAEL
ADEWALE. SAMUEL
OYETUGA. MARY
ADEYEMI. OLANREWAJU

PETIT LARCENY
(46-49)

ADEKANBI. OLUSHINA GODWIN
OSIBOTE. PRINCE DELE
OGUNNUSI, ROTIMI
ATAMOLOGUN. MICHAEL
ADEWALE, SAMUEL
OYETUGA. MARY
ADEYEMI. OLANREWAJU

CRIMINAL POSSESSION OF
FORGERY DEVICES (50-52)

ADEKANBI. OLUSHINA GODWIN
OSIBOTE, PRINCE DELE
OGUNNUSI, ROTIMI
ATAMOLOGUN, MICHAEL
ADEWALE. SAMUEL
OYETUGA. MARY
ADEYEMI, OLANREWAJU

CRIMINAL POSSESSION OF
FORGED INSTRUMENT IN THE
SECOND DEGREE (53-117)

ADEKANBI. OLUSHINA GODWIN
OSIBOTE, PRINCE DELE
OGUNNUSI, ROTIMI
ATAMOLOGUN. MICAEL
ADEWALE. SAMUEL
OYETUGA, MARY
ADEYEMI, OLANREWAJU

322

CRIMINAL POSSESSION OF

STOLEN PROPERTY IN THE
SECOND DEGREE (118)

AOEKANBI. OLUSHINA GODWIN
OSIBOTE, PRINCE DELE
OGUNNUSI, ROTIMI
ATAMOLOGUN. MICHAEL
ADEWALE, SAMUEL
OYETUGA, MARY
ADEYEMI. OLANREWAJU

PL 165.45(2) CRIMINAL POSSESSION OF

STOLEN PROPERTY IN THE
FOURTH DEGREE (119-191)

ADEKANBI, OLUSHINA GODWIN
OSIBOTE. PRINCE DELE
OGUNNUSI, ROTIMI
ATAMOLOGUN, MICHAEL
ADEWALE, SAMUEL
OYETUGA, MARY
ADEYEMI. OLANREWAJU

CRIMINAL POSSESSION OF

STOLEN PROPERTY IN THE
FIFTH DEGREE (192)

AOEKANBI, OLUSHINA GODWIN
OSIBOTE. PRINCE DELE
OGUNNUSI, ROTIMI
ATAMOLOGUN. MICHAEL
ADEWALE. SAMUEL
OYETUGA. MARY
OSHODI, AWNDELE
ADEYEMI, OLANREWAJU

CRIMINAL POSSESSION OF
STOLEN PROPERTY IN THE
FIFTH DEGREE (193-196)

ADEKANBI, OLUSHINA GODWIN
OSIBOTE, PRINCE DELE
OGUNNUSI, ROTIMI
ATAMOLOGUN, MICHAEL
ADEWALE, SAMUEL
OYETUGA. MARY
ADEYEMI, OLANREWAJU

CRIMINAL POSSESSION OF
COMPUTER RELATED MATERIAL
(197-200)

ADEKANBI, OLUSHINA GODWIN
OSIBOTE. PRINCE DELE
OGUNNUSI. ROTIMI
ATAMOLOGUN. MICHAEL
ADEWALE, SAMUEL
OYETUGA, MARY
ADEYEMI, OLANREWAJU

A TRUE BILL

DISTRICT ATTORNEY

323

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF QUEENS CRIMINAL TERM

THE PEOPLE OF THE STATE OF NEW YORK

-against-

OLUSHINA GODWIN ADEKANBI

a/k/a "SHINA-. a/k/a "GODY"
PRINCE DELE OSIBOTE
ROTIMI OGUNNUSI

a/k/a -ROY-
MICHAEL ATAMOLOGUN

a/k/a MIKE ODEKU
SAMUEL ADEWALE
MARY OYETUGA
OLANREWAJU ADEYEMI

a/k/a FLORENCE JAMERSON
AKINDELE OSHODI

a/k/a -NIYI-

FILED:

INDICTMENT NO.:4355/95

SUPERSEDES NO.:4203/95

Detendant(s).

FIRST cou^^■

ENTERPRISE CORRUPTION

THE GRAND JURY OF THE COUNTY OF QUEENS, by this Indictment, accuses the defendants
OLUSHINA GODWIN ADEKANBI. a/k/a -SHINA". a/k/a 'GODr. PRINCE DELE OSIBOTE. ROTIMI
OGUNNUSI. a/k/a -ROY". MICHAEL ATAMOLOGUN. a/k/a MIKE ODEKU. of the crime of ENTERPRISE
CORRUPTION, in violation of Penal Law Section 460.20(1)(a). committed in the County of Queens and
elsewhere, as follows

The defendants. OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
and MICHAEL ATAMOLOGUN, from on or about October 1, 1994 to on or about September 10, 1995,
having knowledge of the existence of a criminal enterprise, and the nature of its activities, and being
employed by or associated with that criminal enterprise, intentkinally conducted and participated in the
affairs of the enterprise by participating in a pattern of criminal activity, as follows:

324

THE CRIMINAL ENTERPRISE

At all times relevant to Count One:

(1) The defendants, OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE,
ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, along with other persons known and unknown, were
members of or associated with an enterprise in which they shared a common purpose of engaging in
criminal conduct, and were associated in a structure that was distinct from the psittern of criminal activity
and that had a continuity of existence, structure and criminal purpose beyond the scope of individual
criminal incidents.

(2) The above-named defendants were members of a group of persons which
operated an unlawful credit card oper£ition in Queens and Kings Counties. This group of persons,
hereinafter referred to as the 'Shina Credit Card Fraud Group', constituted a 'criminal enterprise" as that
term is defined in Penal Law SectK>n 460.10(3).

(3) The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI
OGUNNUSI. MICHAEL ATAMOLOGUN, were members of the Shina Credit Card Fraud Group.

(4) There were other members of the Shina Credit Card Fraud Group not named
herein as defendants, who were emptoyed by and associated with It. Some of these included
OLANREWAJU ADEYEMI. a/k/a FLORENCE JAMERSON, SAMUEL ADEWALE, AKINDELE OSHODI,a/k/a
■NIYI'and MARY OYETUGA, defendant ADEKANBI's wife, ADEBAYO ODESANYA, OYEWALE ADEMOLA
OLATUNJI, and OLALANRE ANIMASHAUN, a/k/a 'LARRr.

PURPOSE AND STRUCTURE OF THE CRIMINAL ENTERPRISE

(5) It was the comnrran purpose of the members and associates of the Shina Credit
Card Fraud Group to engage in criminal conduct and to acquire nrK>ney, goods, and services illegally
through the acquisitk>n. possession, manufacture, distribution and use of stolen and counterfeit credit
cards

325

(6) The Criminal Enterprise, known as the Shina Credit Card Fraud Group, consisted
of at least twenty (20) individuals operating at three or more levels, hereincrfter referred to as "principals",
"managers" and "soldiers" The principals were OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE.
ROTIMI OGUNNUSI. and others The principals controlled the Shina Credit Card Fraud Group, received
the cash proceeds and goods and services of the enterprise from the managers and soldiers, and gave
instructions to said managers and soldiers The principals also manufactured, distributed, sold or used
counterfeit credit cards and distributed, sold or used stolen credit cards. Managers obtained cash
advances or goods for the principals and for themselves using stolen or counterfeit credit cards provided
to them by the principals. Managers also recruited and compensated soldiers to assist them in obtaining
said cash advances or goods. Managers acted as middlemen for soldiers wishing to purchase stolen or
counterfeit credit cards from the principals. Managers also located individuals known as 'customers"
wishing to purchase stolen or counterfeit credit cards and steered said sales to the principals or acted as
middlemen for the principals SokJiers assisted managers in obtaining the aforementioned cash advances
and goods by use of stolen or counterfeit credit cards by serving as drivers or kxikouts or conducting the
cash advance or goods transactions at the directions of the managers. Soldiers also provided raw
materials to the nrunagers and principals such as stolen invoices, bearing credit card access numbers, or
false identification, such as drivers' licenses, to enable other members of the enterprise to use the stolen
or counterfeit credit cards successfully and without detection.

(7) The credit card operation was conducted by the Shina Credit Card Fraud Group
as follows:

i) The principals would buy stolen invoices, stolen computer data,

stolen bank documents or other credit information obtained by use of Illegal or unauthorized means from
soldiers The principals woukl use said documents to obtain credit card information of legitimate
cardholders without their knowledge or permission and manufacture counterfeit credit cards using said
Information. The principals woukl also change PIN numbers on existing accounts of said cardholders In
order to manufacture counterfeit credit cards and obtain cash advances at ATMs. The principals woukl

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also divert the mail of said cardholders to commercial mail boxes rented by said principals by filing forged
U.S. Post Office change of address cards in the name of said cardholders or sending forged change of
address requests to the credit card companies of said cardholders, thereby obtaining additional credit and
pedigree information relevant to said cardholders, and credit cards, convenience checks, checks and other
financial matter sent to said cardholders.

ii*). The principals woukj buy credit cards stolen by sokjiers from the

U.S. nnail. Typically, credit card instltutkins would mail out batches of credit cards destined for cardholders
living in a particular regk>n of the United States. Sakj batch or a substantial portion thereof would be
stolen from the US mall at airports or other points of shipment. The stolen credit cards, still In the original
envelopes and mailing sleeves, woukJ then t>e sokj to a principal. The principal would then sell or
distribute said cards to members of the Shlna Credit Card Fraud Group.

110 The principals possessed machinery which produced counterfeit

credit cards or which altered stolen credit cards thereby making them counterfeit by re-embossing or re-
encoding them. The principals possessed information necessary to encode and re-encode the magnetic
stripes on said credit cards.

iv). The principals used stolen credit cards to obtain cash advances,
goods and services, which would be billed to the legitimate cardholder and ultimately resulted in economic
bss to the credit card company or institutkxi. The principals also used stolen credit cards as identification
to obtain services for themselves using the name of the legitimate cardholder such as cellular telephone
service.

v). The principals used counterfeit credit cards to obtain cash

advances, goods and services, which would be billed to the legitimate cardhokjers whose credit card
access numbers were encoded or emtxissed on said counterfeit credit cards and ultimately resulted in
economic bss to the credit card company or institutkxi.

vi). The principals sokJ stolen credit cards to managers and sokJiers
and customers of the enterprise for their own personal use. the price being a percentage of the credit

327

card's credit limit. The principals also distributed stolen credit cards to managers and soldiers In order
for said members to 'shop* the cards, obtaining cash advances and goods for said principals In exchange
for a percentage of the economic gain. In all Instances, the charges made with said stolen cards would
be billed to the legitimate cardholders and ultimately resulted in economic loss to the credit card company
or institution.

vi) The principals manufactured counterfeit credit cards and sold said

cards to managers and soldiers for their own personal use. the price being a flat rate which varied if the
purchaser supplied a credit card access number or if said number had to be provided by a principal or
manager. The principals also manufactured and sold said counterfeit cards to customers by taking the
order and payment from managers and giving the completed counterfeit credit card to the manager for
distribution to the customer. The principals also distributed counterfeit credit cards to managers and
soldiers In order for said members to 'shop* the cards, obtaining cash advances and goods for said
principals in exchange for a percentage of the economic gain. In all instances, the charges made with said
counterfeit cards would be billed to the legitimate cardholders whose credit card access numbers were
embossed or encoded on said counterfeit credit cards and ultimately resulted in economic loss to the
credit card company or institution

(8) Defendant OLUSHINA GODWIN ADEKANBI. a/k/a 'SHINA*. a/k/a ■GODY* was the
lead principal In charge of the Shina Credit Card Fraud Group, and as such, controlled all of the functnns
of the Shina Credit Card Fraud Group Together with defendant PRINCE DELE OSIBOTE, he conducted
the day-to-day business of the Shina Credit Card Fraud Group's credit card operation, keeping books and
records reflecting such business, controlling the fk>w and distribution of stolen and counterfeit credit cards
and reviewing transactions done by managers and sokjiers, and receiving the proceeds therefrom.

(9) Defendant PRINCE DELE OSIBOTE was the next lead principal, second in
command, controlling all of the functions of sakj Shina Credit Card Fraud Group with OLUSHINA GODWIN
ADEKANBI. He also directed all managers and sokJiers when defendant OLUSHINA GODWIN ADEKANBI
was out of town furthenng the business of the enterprise or was otherwise unavailable.

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(10) Defendant ROTIMI OGUNNUSI. a/k/a *ROY*. was a principal of the Sfiina Credit
Card Fraud Group who directed managers and soldiers to obtain cash transactions or goods for the
enterprise. His functions also related to the technical area of the enterprise such as printing and encoding
counterfeit cards, as well as reviewing and working up stolen Invoices In order to use the credit card
access numbers contained on said invoices.

(11) Defendant MICHAEL ATAMOLOGUN, a/k/a MIKE ODEKU. was a manager of the
Shina Credit Card Fraud Group engaged in cash transactnns and purchases using stolen and counterfeit
credit cards and who recruited, directed and compensated sokiiers to engage in cash transactions or
purchases using stolen or counterfeit credit cards. He also sokJ credit card access numbers to soldiers
and customers and obtained counterfeit credit cards from the principals for those soldiers and customers
bearing those access numbers

PATTERN OF CRIMINAL ACTIVITY

During the period of this offense, each of the defendants, with Intent to participate In and advance
the affairs of the criminal enterprse and pursuant to a common scheme and plan, engaged in conduct
constituting or was criminally liable for the folk>wing criminal acts included within an established pattern
of criminal activity

PATTERN ACT ONE

The defendants, and SAMUEL ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI. AKINDELE
OSHODI and others known and unknown to the Grand Jury, committed the crime of CONSPIRACY IN THE
FIFTH DEGREE in violation of Penal Law §105.05(1). In that from on or about October 1, 1994 to on or
about September 10. 1995. in the County of Queens and elsewhere, with intent that conduct constituting
a felony, to wit: Scheme to Defraud in the First Degree, be performed, agreed with one or more persons
to engage in or cause the performance of such conduct.

It was a purpose of this conspiracy to acquire money, goods and services through the operation
of an unlawful enterprise which acquired, possessed, manufactured, distributed and used stolen and
counterfeit credit cards At all times relevant to this indictment, defendant OLUSHINA GODWIN ADEKANBI .

329

supervised this credit card enterprise, which consisted of a location in Queens and other locations

As part of this conspiracy, defendant PRINCE DELE OSIBOTE worked as the second in command
in the credit card enterprise, thereby supervising the operation of the enterprise and meeting with or
speaking regularly with defendant OLUSHINA GODWIN ADEKANBI.

As part of this conspiracy, defendant ROTIMI OGUNNUSI acted as a principal in the credit card
enterprise, meeting regularly with defendants OLUSHINA GODWIN ADEKANBI and PRINCE DELE
OSIBOTE.

As part of this conspiracy, defendant MICHAEL ATAMOLOGUN acted as a manager of the credit
card enterprise obtaining cash advances and goods for defendants OLUSHINA GODWIN ADEKANBI and
PRINCE DELE OSIBOTE and recruiting others to obtain cash advances and goods for himself and for said
defendants using stolen and counterfeit credit cards. Defendant MICHAEL ATAMOLOGUN also brokered
sales of counterfeit credit cards manufactured by defendants OLUSHINA GODWIN ADEKANBI, PRINCE
DELE OSIBOTE or ROTIMI OGUNNUSI to other members and customers of the enterprise.

As part of this conspiracy. OLANREWAJU ADEYEMI. SAMUEL ADEWALE and MARY OYETUGA
and others used stolen or countertelt credit cards and false identification to obtain cash advances and
goods for the credit card enterprise and themselves.

As part of this conspiracy. AKINOELE OSHODI provided store invoices belonging to Fretter. an
appliance store chain kicated In Massachusetts, and which Invoices contained credit card access numbers
of customers of Fretter. to OLUSHINA GODWIN ADEKANBI and others working in the above nientnned
credit card enterprise.

OVERT ACTS
In furtherance of the conspiracy and to effect the objects thereof, and during the course thereof,
the folkswing overt acts. anKtng others, were committed:

(1) On or about August 1 . 1995. Apartment 9M at 164-20 Highland Avenue, Jamaica,
Queens. New York was rented In the name of 'Rhonda Freeman".

(2) On or about September 10,1 995. in the County of Queens, the defendants, acting

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in concert with each other and others, possessed in excess of five hundred credit card access numbers
assigned to individuals other than the defendants and others acting in concert with them.

(3) On or about September 10. 1995 in the County of Queens, the defendants, acting
in concert with each other and others, possessed in excess of fifty stolen credit cards.

(4) On or about September 10.1 995 in the County of Queens, the defendants . acting
in concert with each other and others, possessed in excess of fifty counterfeit credit cards.

(5) On or about September 10. 1995, in Jamaica, Queens, the defendants, acting in
concert with each other and others, possessed in excess of 500 store invoices of Fretter. an appliance
store chain located in Massachusetts.

(6) On or about and between July 21 . 1994 and July 1 , 1995, In the County of Kings
and the State of Massachusetts and elsewhere. AWNDELE OSHODI possessed store invoices of Fretter.

(7) On or about September 10, 1995, In Jamaica. Queens, the defendants, acting in
concert with each other and others, possessed in excess of fifty store Invoices of Budget Car and Truck
Rental from Warwick. Rhode Island

(B) On or about September 10. 1995. in Jamaica, Queens, the defendants, acting in
concert with each other and others, possessed twenty Invoices of WLF Automotive, a gasoline station in
Evanston. Illinois.

(9) On or about September 10, 1995, In Jamaica. Queens, the defendants, acting in
concert with each other and others, possessed a portable embossing machine.

(10) On or about September 10. 1995. In Jamaica. Queens, the defendants, acting in
concert with each other and others, possessed a portable tipping machine.

(11) On or about September 10. 1995. In Jamaica, Queens, the defendants, acting in
concert with each other and others, possessed a portable encoding machine.

(12) On or about September 10. 1995 in Jamaica Queens, the defendants, acting in
concert with each other and others, possessed Universal Bank convenience checks in the name of "Jay
Weaver".

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(13) On or about September 10. 1995 in Janiaica, Queens, SAMUEL AOEWALE. acting
in concert with others, possessed Budget Car and Trucl< Rental invoice #GONAA2414130.

(14) On or about and between September 8, 1995 and September 10, 1995. in
Jamaica, Queens, ROTIMI OGUNNUSI, acting In concert with others, possessed Budget Car and Truck
Rental invoice #PVDAA5702964.

(15) On or about September 10, 1995, in Jamaica, Queens. ROTIMI OGUNNUSI, acting
In concert with others, possessed a Bank One VISA credit card in the name of 'John Paul Barr*.

(16) On or about September 10, 1995, in Jamaica, Queens, OLUSHINA GODWIN
ADEKANBI, acting in concert with others, possessed an Arizona driver's license in the name of JOHN P.
BARR".

(17) On or about September 10, 1995, in the County of Queens, the defendants, acting
in concert with each other and others, possessed a computer printout with the names, addresses, phone
numbers and social security numbers of nine individuals.

(18) On or about September 10. 1995, In Jamaica, Queens, MARY OYETUGA, acting
In concert with others, possessed a 'State of Massachusettes" [sic] Identification card in the name *Mary
Olesanya".

(19) On or about September 10, 1995, In Jamaica, Queens, MARY OYETUGA, acting
in concert with others, possessed a J.C. Penny credit card in the name of 'Linda Moore'.

(20) Onorabout September 10. 1995, in Jamaica, Queens, ROTIMI OGUNNUSI. acting
in concert with others, possessed a list of equipment which can be used to manufacture credit cards.

(21 ) On or about July 30. 1995 and September 10, 1995, in the County of Queens and
elsewhere, the defendants, acting in concert with each other and others, possessed a cellular telephone
encoded with AT&T Wireless mobile identification number 917-853-3645.

(22) On or about August 27. 1995. in Jamaica. Queens, merchandise was purchased
from Incredible Fkx>rs Corp. using a VISA credit card in the name of 'Mark Dunlop'.

332

(23) On or about September 10. 1995 in Jamaica. Queens. OLUSIHINA GODWIN
ADEKANBI. acting in concert with others, possessed a New Jersey driver's license in the name of 'Daniel
Yemkin".

(24) On or about June 13. 1995. OLUSHINA GODWIN ADEKANBI purchased a Sharp
pocket organizer from Staples in New York. New York, using a VISA credit card in the name of 'Daniel
Yemkin".

(25) On or about September 9. 1995. OLANREWAJU ADEYEMI.

a/k/a FLORENCE JAMERSON. acting in concert with others, purchased merchandise from Staples in
Jamaica. Queens using a Diamond Prestige VISA credit card in the name of 'Laura Winskiw".

(26) On or about September 9, 1995, in the County of Queens and elsewhere.
OLANREWAJU ADEYEMI . acting in concert with others, possessed a New York driver's license in the name
of "Laura Winslow".

(27) On or about and between June 21. 1995 and September 10. 1995. in Jamaica.
Queens and elsewhere. PRINCE DELE OSIBOTE possessed a Virginia driver's license in the name of
"RICHARD RAMSEY".

(28) On or about June 21 . 1995. commercial mail box #184 was rented at 207 E. Ohio.
Chicago. Illinois in the name of 'Richard Ramsey".

(29) On or about August 1 . 1995. commercial mail box #128 was rented at 207 Church
Avenue. Brooklyn. New York.

(30) On or about September 1. 1995. commercial mail txix #148 was rented at 207
Church Avenue, Brooklyn. New York

(31) On or about August 28. 1 995. a change of address letter for the Integra Bank VISA
credit card account of Terry Lee Hritz was faxed from Forest Hills, Queens to said credit card institution.

(32) On or about August 28. 1995, a U.S. Post Office change of address card for Daniel
Hunnel was mailed from Queens. New York.

(33) On or about August 1 . 1995, a U.S. Post Offic^ change of address card for Bettye

i
J

333

Walden was mailed from Brooklyn. New York.

(34) On or about August 1 . 1995. a U.S. Post Office cfiange of address card for William
Whitworth was mailed from Brooklyn. New York

(35) On or about September 10. 1995. in Jamaica, Queens, the defendants, acting In
concert with each other and others, possessed Chemical Bank convenience checks in the name of *William
J. Whitworth".

(36) On or at>out September 10. 1995. in Jamaica, Queens, the defendants, acting in
concert with each other and others, possessed a Chemical Bank Mastercard credit card in the name of
■Bettye W. Walden".

(37) On or at>out October 25. 1994, in the Countyof Nassau and elsewhere, OLUSHINA
GODWIN ADEKANBI possessed store invoices of Fretter.

(38) On or about October 25, 1994, IntheCountyofNassauandelsewhere, OLUSHINA
GODWIN ADEKANBI possessed what purported to be a VISA credit card of NBD Bancorp.

(39) On or about October 25, 1 994. in the County of Nassau and elsewhere. OLUSHINA
ADEKANBI possessed a ctoned cellular telephone.

(40) On or about October 25. 1994. in the County of Nassau and elsewhere, OLUSHINA
GODWIN ADEKANBI possessed a Wachovia VISA credit card in the name of 'Luther Howard*.

(41) On or about October 25. 1994, in the Countyof Nassau and elsewhere, OLUSHINA
GODWIN ADEKANBI possessed a tslationsbank VISA credit card in the name of "Luther Howard".

(42) On or about October 25, 1994 in the County of Nassau and elsewhere, OLUSHINA
GODWIN ADEKANBI possessed a New Jersey driver's license in the name of 'Luther Howard'.

(43) On or atx>ut May 11. 1995. in ttie County of Kings and elsewhere. OLUSHINA
GODWIN ADEKANBI possessed a counterfeit VISA credit card in the name of 'Emanuel Jones".

(44) On or about May 11. 1995. in Fort Lee. New Jersey. OLUSHINA GODWIN
ADEKANBI. acting in concert with another, attempted to obtain a cash advance in the amount of $2000.00
from Natwest Bank using a counterfeit VISA credit card in the name of "Emanuel Jones'.

334

(45) On or about and between June 30, 1995. in the County of Kings and elsewhere.
MICHAEL ATAMOLOGUN, acting in concert with others, possessed a New Jersey driver's license in the
name of *Mark D Morris'

(46) On or about June 30, 1995. in the County of Kings and elsewhere, MICHAEL
ATAMOLOGUN, acting in concert with others, possessed a VISA credit card in the name of "Mark 0.
Morris*.

(47) On or about and between July 15, 1995 and August 11, 1995. in the County of
Kings and elsewhere, MICHAEL ATAMOLOGUN, acting in concert with others, possessed a New York
driver's license in the name of "David Sherman*.

(48) On or atXHrt and between July 15, 1995 and July 19, 1995, in ttie County of Kings
and elsewhere, MICHAEL ATAMOLOGUN, acting in concert with others, possessed a VISA credit card in
the name of 'David Sherman*.

(49) On or about and between July 15, 1995 and July 19, 1995, in the County of Kings
and elsewhere, MICHAEL ATAMOLOGUN. acting in concert with others, possessed a VISA credit card in
the name of 'Joseph Ward*

(50) On or atxxjt and between July 15, 1995 and July 19, 1995, in the County of Kings
and elsewhere. MICHAEL ATAMOLOGUN. acting in concert with others, possessed a VISA credit card in
the name of *Stanley Johnson*

(51) On or about June 30. 1995. in Branford, Connecticut, MICHAEL ATAMOLOGUN,
obtained a cash advance in the amount of S2525.00 from Branford Savings Bank, using a VISA credit card
in the name of 'Stanley Johnson'

(52) On or about July 11. 1995, in Guilford. Connecticut. MICHAEL ATAMOLOGUN
obtained a cash advance in the amount of S2B00.00 from the New Haven Savings Bank using a VISA card
in the name of 'Mark D Morris*.

(53) On or about July 15. 1995 in Niantic, Connecticut, MICHAEL ATAMOLOGUN
obtained a cash advance in the anrKiunt of $3000.00 from Chelsea Groton Savings Bank using a VISA

335

credit card in the name of *David Sherman'.

(54) On or about July IB. 1995. In Old Lyme. Connecticut, MICHAEL ATAMOLOGUN
obtained a cash advance in the amount of $3000.00 from the Maritime Bank and Trust in Niantic,
Connecticut, using a VISA credit card in the name of 'Stanley Johnson".

(55) On or about July 19. 1995, in Waterford. Connecticut, MICHAEL ATAMOLOGUN
obtained a cash advance in the amount of $2900.00 from Citizens Bank using a VISA Credit Card in the
name of 'Joseph Ward'.

PATTERN ACT TWO
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
MICHAEL ATAMOLOGUN. acting in concert with each other and others, committed the crime of SCHEME
TO DEFRAUD IN THE FIRST DEGREE in violation of Penal Law Section 190.65 (1)(a) in that on or about
and between October 1. 1994 and September 10, 1995, In the County of Queens and elsewhere, they
engaged in a scheme constituting a systematic ongoing course of conduct with intent to defraud ten or
more persons or to obtain property from ten or more persons by false or fraudulent pretenses,
representations or promises, and so obtained property, to wit: United States Currency, from at least one
such person whose identity is known to ttie Grand Jury.

PATTERN ACT THREE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF
FORGERY DEVICES in violation of Penal Law Section 170.40 in that on or about and between August 1,
1995 and September 10. 1995 in the County of Queens, they possessed with knowledge of its character
any plate, die or other device, apparatus, equipment, or article specifically designed for use in to vA:
counterfeiting credit cards.

4»ATTERN ACT FOUR
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF

336

FORGERY DEVICES in violation of Penal Law Section 170.40 in that on or about and between August 1 .
1995 and September 10, 1995 in the County of Queens, they possessed with knowledge of its character
any plate, die or other device, apparatus, equipment, or article specifically designed tor use In to wrt:
counterfeiting credit cards.

PATTERN ACT FIVE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF
FORGERY DEVICES in violation of Penal Law Section 1 70.40 in that on or about and between August 1 ,
1995 and September 10. 1995 in the County of Queens, they possessed with knowledge of its character
any plate, die or other device, apparatus, equipment, or article specifically designed for use in to wit:
counterfeiting credit cards.

PATTERN ACT SIX
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTII^I
OGUNNUSI. acting in concert with each other and others, comitted the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170J25. in that
on or about and between June 13, 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a written instrument officially Issued or created by a public office,
public servant or governmental instrumentality.

PATTERN ACT SEVEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI
OGUNNUSI, acting In concert with each other and others, comitted the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that
on or about and between June 21 . 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a written Instrument ofTicially issued or created by a public office,

337

public servant or governmental instrumentality.

PATTERN ACT EIGHT
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI
OGUNNUSI, acting in concert with each other and others, comrtted the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that
on or about September 10, 1 995. in the County of Queens and elsewhere, they, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a written instrument officially issued or created by a public office, public servant or governmental
instrumentality.

PATTERN ACT NINE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI
OGUNNUSI, acting in concert with each other and others, comitted the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that
on or about September 10. 1995. in the County of Queens and elsewhere, they, with knowledge that it was
forged and with intent to defraud, deceive or Injure another, uttered or possessed a forged instrument, to
wit: a written instrument officially issued or created by a public office, public servant or govemmental
instrumentality.

PATTERN ACT TEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI
OGUNNUSI. acting in concert with each other and others, comitted the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that
on or about September 10.1 995. in the County of Queens and elsewhere, they, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a written instrument officially issued or created by a public office, public servant or governmental
instrumentality

PATTERN ACT ELEVEN

338

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI
OGUNNUSI, acting In concert with each other and others, comltted the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that
on or about September 10, 1995, in the County of Queens and elsewhere, they, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a written instrument officially issued or created by a public office, public servant or governmental
instrumentality.

PATTERN ACT TWELVE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI
OGUNNUSI . acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that
on or about September 10, 1995. in the County of Queens and elsewhere, they, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a written instrument officially issued or created by a public office, public servant or governmental
instrumentality.

PATTERN ACT THIRTEEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI
OGUNNUSI, acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that
on or about September 10. 1995. in the County of Queens and elsewhere, they, with knowledge that it vras
forged and with Intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a written instrument officially Issued or created by a public office, public servant or governmental
instrumentality.

PATTERN ACT FOURTEEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI
OGUNNUSI, acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION

339

OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. In that
on or about September 10,1 995. in the County of Queens and elsewhere, they, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a written instrument officially issued or created by a public office, public servant or governmental
instrumentality.

PATTERN ACT FIFTEEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the chme of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that on or
about and between August 1. 1995 and September 10. 1995. in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT SIXTEEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that on or
about and between August 1. 1995 and September 10, 1995. in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or othenwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT SEVEffTEEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A

340

FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1, 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with Intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other Instrument which does or may
evidence, create, transfer, terminate or othenwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT EIGHTEEN

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMItslAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1, 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, writh knowledge that it was forged and with intent to defraud, deceive or Injure another, uttered or
possessed a forged instrument, to wit a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT NINETEEN

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMIIMAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in vkalation of Penal Law Section 170.25. in that on or
about and between August 1,1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge ttiat it was forged and with intent to defraud, deceive or Injure another, uttered or
possessed a forged instrument, to wit a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right. Interest, obligatbn or status, to wit:
a credit card.

PATTERN ACT TWENTY

The defendants OLUSHIf^ GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,

341

acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that on or
about and between August 1, 1995 and September 10. 1995. in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT TWENTY-ONE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEI^ IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1, 1995 and September 10, 1995. in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or othenvise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT TWENTY-TWO
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in vralation of Penal Law Section 170.25. in that on or
about and between August 1. 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other Instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligatbn or status, to wit:
a credit card.

PATTERN ACT TWENTY-THREE

342

The defendants OLUSHINA GODWIN AOEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf^ IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that on or
about and between August 1. 1995 and September 10. 1995. in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or Injure another, uttered or
possessed a forged instrument, to wit: a commercial Instrument or other Instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT TWENTY-FOUR
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE In violation of Penal Law Section 170.25, In that on or
about and between August 1. 1995 and September 10, 1995, In the County of Queens and elsewhere,
they, with knowledge that It was forged and with intent to defraud, deceive or Injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other Instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT TWENTY-FIVE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in vlolatk>n of Penal Law Sectbn 170.25, In that on or
about and between August 1. 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that It was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to v^:
a credit card.

343

PATTERN ACT TWENTY-SIX

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting In cxjncert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEfsTT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that on or
about and between August 1. 1995 and September 10, 1995. in the County of Queens and elsewhere,
they, with knowledge that It was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial Instrument or other Instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation and status, to wit:
a credit card.

PATTERN ACT TWENTY-SEVEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between March 23. 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that rt was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or othenwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT TWENTY-EIGHT
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between June 1 . 1995 and September 10, 1995, in the County of Queens and elsewhere, they,
vnth knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may

344

evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT TWENTY-NINE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in vblation of Penal Law Section 170.25, in that on or
about and between June 19, 1995 and September 10, 1995. in the County of Queens and elsewhere, they,
with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT THIRTY

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Uw Section 170.25, in that on or
atx>ut and between March 29. 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with Intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligaton or status, to wit:
a credit card.

PATTERN ACT THIRTY-ONE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in vk}latk>n of Penal Law Sectk>n 170.25. in that on or
alx>ut and between August 1. 1995 and September 10. 1995. in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or

345

possessed a forged instrument, to wit: a commercial instrument or other Instrument wtiich does or may
evidence, create, transfer, terminate or othenwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT THIRTY-TWO
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between March 25, 1995 and September 10, 1995, In the County of Queens and elsewhere,
they, with knowledge that it was forged and with Intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial Instrument or other Instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT THIRTY-THREE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE In violation of Penal Law Section 170.25, in that on or
about and between July 13. 1995 and September 10. 1995. In the County of Queens and elsewhere, they,
with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT THIRTY-FOUR

The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.

acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A

FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or

about and between June 22, 1995 and September 10, 1995, in the County of Queens and elsewhere, they.

346

with knowledge that it was forged and with Intent to defraud, deceive or Injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or ofay
evidence, create, transfer, terminate or otherwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT THIRTY-FIVE
The defendants OLUSHINA GODWIN AOEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170J25, in that on or
about and between August 1. 1995 and September 10. 1995. In the County of Queens and elsevi^ere.
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial Instrument or other instrument which does or may
evkjence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT THIRTY-SIX
The defendanu OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE In vk}latk>n of Penal Law Sectnn 17025, In that on or
about and between August 1. 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit a commercial Instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT THIRTY-SEVEN
The defendanu OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in vk>latk>n of Penal Law Sectksn 170.25. in that on or

347

about and between August 1, 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT THIRTY-EIGHT
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1, 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT THIRTY-NINE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf^ IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1. 1995 and Septemt>er 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or Injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FORTY
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A

348

FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, In that on or
about and between November 24, 1994 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that It was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT FORTY-ONE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Uw Section 170.25, in that on or
about and between June 22, 1995 and September 10, 1995, In the County of Queens and elsewhere, they,
with knowledge that It was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FORTY-TWO

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEfsTT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that on or
about and between March 1. 1995 and September 10, 1995, in the County of Queens and elsewhere, they,
with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or othenvise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FORTY-THREE

The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.

349

acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170^5. in that on or
about and between August 1. 1995 and September 10. 1995. in the County of Queens and elsewhere,
they, with knowledge that it was forged and with Intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FORTY-FOUR
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEI^ IN THE SECOND DEGREE in violation of Penal Law Section 170^5, in that on or
about and between August 1. 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that It was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or othenwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FORTY-FIVE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert wrth each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Sectran 170.25, in that on or
about and between August i. 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit a commercial instrument or other Instrument which does or may
evidence, create, transfer, terminate or othenmse affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FORTY-SIX

350

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1, 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FORTY-SEVEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1, 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defrsujd, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FORTY-EIGHT
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Secton 170.25, in that on or
about and between August 1. 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

351

PATTERN ACT FORTY-NINE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUME^T IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between July 3, 1995 and September 10, 1995, in the County of Queens and elsewhere, they,
with knowledge that It was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FIFTY

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that on or
about and between August 1, 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FIFTY-ONE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Uw Section 170.25, in that on or
about and between August 1. 1995 and September 10. 1995. in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may

352

evidence, create, transfer, terminate or otherwise affect a legal rigfit, Interest, obligation or status, to wit:
a credit card.

PATTERN ACT FIFTY-TWO
Tfie defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTII^I OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf^ IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1, 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or Injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FIFTY-THREE
The defendants OLUSHII^ GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1, 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that It was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit a commercial Instrument or other instrument which does or may
evidence, create, transfer, terminate or othenwise affect a legal right, interest, obligation or status, to vnt:
a credit card.

PATTERN ACT FIFTY-FOUR
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1. 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge ttiat It was forged and with intent to defraud, deceive or injure another, uttered or

353

possessed a forged instrument, to wit: a commercial instrument or other instrument wtiich does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT FIFTY-FIVE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1, 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that It was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT FIFTY-SIX
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that on or
about and between August 1. 1995 and September 10. 1995. in the County of Queens and elsewhere,
they, with knowledge thert it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT FIFTY-SEVEN

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.

acting in concert with each other and others, committed the crime of CRIMIfslAL POSSESSION OF A

FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or

about and between September 5. 1995 and September 10. 1995. in the County of Queens and elsewhere.

354

they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged Instrument, to wit: a commercial instrument or other Instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right. Interest, obligation or status, to wit:
a credit card.

PATTERN ACT FIFTY-EIGHT

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE In violation of Penal Law Section 170.25, in that on or
about and between July 1 . 1995 and September 10, 1995, In the County of Queens and elsewhere, they,
with knowledge that it was forged and with Intent to defraud, deceive or Injure another, uttered or
possessed a forged Instrument, to wit: a commercial Instrument or other Instrument which does or n^y
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wK:
a credit card.

PATTERN ACT FIFTY-NINE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE In violatkjn of Penal Law Sectbn 170.25, in that on or
about and between December 19, 1994 and September 10, 1995, In the County of Queens and elsewhere,
they, with knowledge that it was forged and with Intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit; a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligatbn or status, to wit:
a credit card.

PATTERN ACT SIXTY

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE In violation of Penal Law Sectkjn 170.25, In that on or

355

about and between August 1. 1995 and September 10, 1995, in the County of Queens and elsewtiere.
they, with knowledge that It was forged and with Intent to defraud, deceive or Injure another, uttered or
possessed a forged Instrument, to wit: a commercial Instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT SIXTY-ONE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE In violation of Penal Law Section 170.25. in that on or
about and between August 1. 1995 and September 10, 1995. in the County of Queens and elsewhere,
they, with knowledge that it was forged and with Intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial Instrument or other Instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligatkin or status, to wit:
a credit card.

PATTERN ACT SIXTY-TWO
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in vkjiatlon of Penal Law Section 170.25, in that on or
about and between August 1. 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with Intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligatnn or status, to wit:
a credit card.

PATTERN ACT SIXTY-THREE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A

356

FORGED INSTRUME^4T IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that on or
about and between July 15. 1995 and September 10, 1995, in the County of Queens and elsewhere, they,
with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other Instrument vt^ich does or may
evidence, create, transfer, terminate or othenwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT SIXTY-FOUR
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIIWII OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIf^lNAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1. 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT SIXTY-FIVE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violatran of Penal Law Section 170.25, in that on or
about and between November 3, 1994 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT SIXTY-SIX
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,

357

acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 17055. in that on or
about and between August 1, 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT SIXTY-SEVEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that on or
about and between August 1. 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or othenmse affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT SIXTY-EIGHT
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEfJT IN THE SECOND DEGREE in violation of Penal Law Sectkjn 170.25. in that on or
about and between August 1. 1995 and September 10. 1995, in the County of Queens and elsewhere,
they, with knowledge that It was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evkjence, create, transfer, terminate or othenwise affect a legal right, interest, obligation or status, to wit:
a credit card.

PATTERN ACT SIXTY-NINE

358

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 7, 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT SEVENTY

The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between August 3. 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to virit: a credit card or debit card.
PATTERN ACT SEVENTY-ONE

ThedefendanU OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other ar>d others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in vkjlaton of Penal Law Section 165.45(2) in that on or about and
between August 3. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, vtrith
Intent to benefit themselves or a person other ttien an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT SEVENTY-TWO

The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Sectkin 165.45(2) in that on or about and
between July 7, 1995 ar>d September 10. 1995. in the County of Queens and elsewhere, thay. with Intent
to benefit themselves Of a person other than an owner thereof or to impede the recovery by an owner

359

thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT SEVENTY-THREE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 29. 1995 and September 10, 1995. In the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT SEVENTY-FOUR
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 5. 1995 and September 10, 1995. In the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT SEVENTY-FIVE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Sectran 165.45(2) in that on or about and
between June 29, 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT SEVENTY-SIX
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violatran of Penal Law Sectksn 165.45(2) in that on or about and

360

between June 29, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT SEVENTY-SEVEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 26, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT SEVENTY-EIGHT
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 29, 1 995 and September 10.1 995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT SEVENTY-NINE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 29. 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT EIGHTY
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,

361

acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 14, 1995 and September 10, 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT EIGHTY-ONE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE QSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 27. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT EIGHTY-TWO
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DEL£ OSIBOTE, ROTIMI OGUNNUSI,
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 29. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT EIGHTY-THREE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 13. 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

362

PATTERN ACT EIGHTY-FOUR

The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Uw Section 165.45(2) in that on or about and
between February 14. 1995 and September 10, 1995, In the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to Impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT EIGHTY-FIVE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIIVII OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 14. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to Impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT EIGHTY-SIX
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between March 23. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to Impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT EIGHTY-SEVEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 14. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with

363

intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT EIGHTY-EIGHT
The defendants OLUSHINA GODWIN AOEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between March 23. 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT EIGHTY-NINE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Uw Section 165.45(2) in that on or about and
between March 22, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, vinth
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT NINETY
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 14. 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT NINETY-ONE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.

S64

acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 13. 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner ttiereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT NINETY-TWO

The defendants OLUSHINA GODWIN AOEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between March 23. 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT NINETY-THREE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between March 13. 1995 and Septemt>er 10. 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT NINETY-FOUR

The defendanu OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 2B. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with
jntent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

365

PATTERN ACT NINETY-FIVE

PATTERN ACT NINETY-SIX
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 27, 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to Impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT NINETY-SEVEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between April 4. 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than £in owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT NINETY-EIGHT
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Sectbn 165.45(2) in that on or about and
between May 17, 1995 and September 10. 1995. in the County of Queens and elsewhere, they, vwth intent

366

to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

PATTERN ACT NINETY-NINE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 24, 1995 and September 10, 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-ONE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 25, 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with Intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-TWO

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN

367

PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) In that on or about and
between February 2. 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-THREE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 13, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-FOUR
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in vkjiation of Penal Law Section 165.45(2) in that on or about and
between March 22. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with
intent to benefit thenrtselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-FIVE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 27. 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with
Intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knownngly possessed stolen property, to wit: a credit card or debit card.

368

PATTERN ACT ONE HUNDRED-SIX

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 6, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to v\nt: a credit card or debit card.
PATTERN ACT ONE HUNDRED-SEVEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 26, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-EIGHT
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 28. 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-NINE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Sectran 165.45(2) in that on or about and
between June 27, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent

369

to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-TEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) In that on or about and
between August 1. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to Impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-ELEVEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIlVll OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 13, 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-TWELVE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in vrolation of Penal Law Section 165.45(2) in that on or about and
between June 27. 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with Intent
to benefit themselves or a person other than an owner thereof or to Impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-THIRTEEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN

370

PROPERPi' IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 27, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-FOURTEEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 27, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to Impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDREE)-FIFTEEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in vwlatkjn of Penal Law Section 165.45(2) in that on or about and
between July 24. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-SIXTEEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Sectkjn 165.45(2) in that on or about and
between July 31 . 1995 and September 10. 1995. In the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.

371

PATTERN ACT ONE HUNDRED-SEVENTEEN

The defendants OLUSHINA GODWIN AOEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 5. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with
Intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-EIGHTEEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 27, 1995 and September 10, 1995. in the County of Queens and elsewhere, they, with intent
to benefit therruelves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED-NINETEEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Sectkin 165.45(2) In that on or about and
between July 24. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED T>i/ENTY
The defendante OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in vmlation of Penal Law Section 165.45(2) in that on or about and
between July 4. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with intent

372

to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED TWENTY-ONE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 29, 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED TWENTY-TWO
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Secton 165.45(2) in that on or about and
between June 29, 1995 and September 10. 1995, In the County of Queens and elsewhere, they, with Intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED TWENTY-THREE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 29. 1995 and September 10, 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED TWENTY-FOUR
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN

373

PROPERTY IN THE FOURTH DEGREE in vioiation of Penal Law Section 165.45(2) in that on or about and
between July 2B, 1995 and September 10, 1995, in ttie County of Queens and elsewtiere, ttiey, witfi intent
to benefit therruelves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED TWENTY-FIVE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between September 5. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED TWENTY-SIX
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 25. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED TWENTY-SEVEN
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 29. 1995 and September 10. 1995. in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other tfian an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED TWENTY-EIGHT

374

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between June 12. 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED TWENTY-NINE
Thidefendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 17, 1994 and September 10, 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED THIRTY
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERT>IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between February 17. 1994 and September 10. 1995. in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED THIRTY-ONE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Sectran 165.45(2) in that on or about and
between November 1 . 1994 and September 10, 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an

375

owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED THIRTY-TWO
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Sectbn 165.45(2) in that on or about and
between July 1 , 1994 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recover/ by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED THIRTY-THREE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIIVll OGUNNUSI,
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violatkin of Penal Law Section 165.45(2) in that on or about and
between July 25. 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED THIRTY-FOUR
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violaton of Penal Law Section 165.45(2) in that on or about and
between May 23. 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other tfian an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED THIRTY-FIVE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in vralatton of Penal Law Sectkjn 165.45(2) in that on or about and

376

between November 1 . 1994 and September 10. 1995. in ttie County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED THIRTY-SIX

The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMIf^AL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Sectton 165.45(2) in that on or about and
between August 5, 1995 and September 10. 1995, in the County of Queens and elsewhere, they, with
intent to benefit themselves or a person other than an owner thereof or to impede the recovery by an
owner thereof, knovmngly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED THIRTY-EIGHT

The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the cnme of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between July 15. 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE THIRTY-NINE

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.

377

acting in concert with each other and others, cocnmittad the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between April 1 , 1995 and September 10, 1995, in the County of Queerts and elsewhere, they, with intent
to benefit themselves or a person other ttian an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED FORTY
The defendants OLUSHIf^ GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on or about and
between November 1 . 1994 and Septemtwr 10, 1995, in the County of Queens and elsewhere, they, with
intent to benefit thenrtsetves or a person other tfian an owner thereof or to impede the recovery by an
owner thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED FORTY-ONE
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FOURTH DEGREE in vkilatnn of Penal Law Sectnn 165.45(2) in that on or about and
between June 1 , 1995 and September 10, 1995, in the County of Queens and elsewhere, they, with intent
to benefit themselves or a person other tfian an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: a credit card or debit card.
PATTERN ACT ONE HUNDRED FORTY-TWO
The defendants OLUSHIIMA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FIFTH DEGREE in violation of Penal Law Secton 165.40. in that on or about
September 10. 1995. in the County of Queens, they, with intent to benefit themselves or a person other
than an owner thereof or to impede the recovery by an owner thereof, knowingly possessed stolen
property, to wit: Fretter invoices.

378

PATTERN ACT ONE HUNDRED FORTY-THREE

The defendants OLUSHINA GODWIN AOEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting In concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE FIFTH DEGREE In violation of Penal Law Section 165.40, In that on or about
September 10, 1995, in the County of Queens, they, with intent to benefit themselves or a person other
than an owner thereof or to Impede the recovery by an owner thereof, knowingly possessed stolen
property, to wit: Budget Car and Truck Rental invoices.

PATTERN ACT ONE HUNDRED FORTY-FOUR
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting In concert with each other and others, committed the crime of CRIMIhJAL POSSESSION OF STOLEN
PROPERTY IN THE RFTH DEGREE in violatkin of Penal Law Section 165.40. in that on or about
September 10, 1995. in the County of Queens, they, with intent to benefit themselves or a person other
than an owner thereof or to impede the recovery by an owner thereof, knowingly possessed stolen
property, to wit: WLF Automotive invoices.

PATTERN ACT ONE HUNDRED FORTY-RVE
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF STOLEN
PROPERTY IN THE RFTH DEGREE in vtolatkin of Penal Law Section 165.40, in that on or about
September 10. 1995. in the County of Queens, they, with intent to benefit themselves or a person other
than an owner thereof or to Impede the recovery by an owner thereof, knowingly possessed stolen
property, to wit: Chemical convenience checks.

PATTERN ACT ONE HUNDRED FORTY-SIX
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMII^AL POSSESSION OF STOLEN
PROPERTY IN THE RFTH DEGREE in violation of Penal Law Sectksn 165.40, in that on or about
September 10, 1995. in the County of Queens, they, with intent to benefit themselves or a person other

379

than an owner thereof or to impede the recovery by an owner thereof, knowingly possessed stolen
property, to wit: Universal Bank convenience checks.

PATTERN ACT ONE HUNDRED FORTY-SEVEN
The defendants OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF
COMPUTER RELATED MATERIAL in violation of Penal Law Section 156.35, in that on or atiout September
1 0, 1995, in the County of Queens, they, when having no right to do so, knowingly possessed, in any form,
any copy, reproduction, or duplicate of any computer data or computer program, which was copied,
reproduced, or duplicated in violaton of Section 156.30 ofthis article, with an intent to commit, or attempt
to commit, or further the commission of any fekxiy, with intent to benefit himself, or a person other than
an owner thereof.

PATTERN ACT ONE HUNDRED FORTY-EIGHT
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF
COMPUTER RELATED MATERIAL n vioiatkxi of Penal Law Sectkxi 156.35, in that on or about September
10, 1 995, in the County of Queens, tttay. wtien having no right to do so, knowingly possessed, in any form,
any copy, reproduction, or dupbcale of any computer data or computer program, which was copied,
reproduced, or duplicated in vnlation of Section 156.30 of this article, with an intent to commit, or attempt
to commit, or further the commission of any fekxiy, with intent to t>enefit himself, or a person other than
an owner thereof

PATTERN ACT ONE HUNDRED FORTY-NINE
The defendants OLUSHItM GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert wKh each other and others, committed the crime of CRIMINAL POSSESSION OF
COMPUTER RELATED MATERIAL m vnlation of Penal Law Sectnn 156.35, in that on or about September
10, 1995. in the County of Queens. tt>ey. wtien having no right to do so, knowingly possessed, in any form,
any copy, reproductnn. or duplicate of any computer data or computer program, which was copied.

380

reproduced, or duplicated in violation of Section 156.30 of ttiis article, with an intent to commit, or attempt
to commit, or further the commission of any felony, with intent to benefit himself, or a person other than
an owner thereof.

PATTERN ACT ONE HUNDRED FIFTY

The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI.
acting in concert with each other and others, committed the crime of CRIMII^JAL POSSESSION OF
COMPUTER RELATED MATERIAL in violation of Penal Law Section 156.35, in that on or atxiut September
10, 1995, in the County of Queens, they, when having no right to do so, knowingly possessed, in any form,
any copy, reproduction, or duplicate of any computer data or computer program, which was copied,
reproduced, or duplicated in violation of Section 156.30 of this article, with an intent to commit, or attempt
to commit, or further the commission of any febny, with intent to benefit himself, or a person other than
an owner thereof.

PATTERN ACT ONE HUNDRED FIFTY-ONE

The defendant OLUSHINA GODWIN ADEKANBI, committed the crime of CRIMII^JAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in vblation of Penal Law Section 170.25, in that
on or about October 25, 1994. in the County of Nassau and elsewhere, he, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
vnt: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a NBD VISA Bancard.
PATTERN ACT ONE HUNDRED FIFTY-TWO

The defendant OLUSHINA GODWIN ADEKANBI. committed the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMEf^ IN THE SECOND DEGREE in violatksn of Penal Law Sectnn 170.25, in that
on or about October 25, 1994, in the County of Nassau and elsewhere, he, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evkjence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a NBD VISA Bancard.

381

PATTERN ACT ONE HUNDRED RFTY-THREE

The defendant OLUSHINA GODWIN ADEKANBI, committed the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMEf^TT IN THE SECOND DEGREE in violation of Penal Law Section 170^5. in that
on or about October 25, 1994. in the County of Nassau and elsewhere, he, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a NBD VISA Bancard.
PATTERN ACT ONE HUNDRED FIFTY-FOUR
The defendant OLUSHINA GODWIN ADEKANBI, committed the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25. in that
on or about October 25, 1994, in the County of Nassau and elsewhere, he, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a NBD VISA Bancard.
PATTERN ACT ONE HUNDRED RFTY-FIVE
The defendant OLUSHINA GODWIN ADEKANBI, committed the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violatbn of Penal Law Sectksn 170.25, in that
on or about October 25. 1994. in the County of Nassau and elsewhere, he, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evkJence, create, transfer, terminate
or otherwise affect a legal right. Interest, obligatbn or status, to wit: a NBD VISA Bancard.
PATTERN ACT ONE HUNDRED nPTY-StX
The defendant OLUSHINA GODWIN ADEKANBI, committed ttie crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in volatkin of Penal Law Sectton 170.25. in that
on or about October 25, 1994. in the County of Nassau and elsewhere, he, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to

382

wit: a commercial instrument or ottier instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a NBD VISA Bancard.
PATTERN ACT ONE HUNDRED FIFTY-SEVEN
The defendant OLUSHINA GODWIN ADEKANBI, committed the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25, in that
on or about October 25, 1994, In the County of Nassau and elsewhere, he, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a NationsBank VISA.
PATTERN ACT ONE HUNDRED nFTY-EIGHT
The defendant OLUSHINA GODWIN ADEKANBI, committed the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMEf^JT IN THE SECOND DEGREE in violation of Penal Law Sectran 170.25, in that
on or about October 25. 1994. in the County of Nassau and elsewhere, he, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a Tuscon Federal Credit Union VISA.
PATTERN ACT ONE HUNDRED RFTY-NINE
The defendant OLUSHINA GODWIN ADEKANBI, committed the crime of CRIMINAL POSSESSION
OF STOLEN PROPERTY IN THE FOURTH DEGREE in vkilatran of Penal Law Section 165.45(2) in that on
or about October 25, 1994, in the County of Nassau and elsewhere, he, with intent to t>enefit himself or
a person other than an owner thereof or to impede the recovery by an owner thereof, knowingly possessed
stolen property, to wit: Wachovia VISA Bank Card.

PATTERN ACT ONE HUNDRED SIXTY
The defendant OLUSHINA GODWIN ADEKANBI, committed the crime of CRIMINAL POSSESSION
OF STOLEN PROPERTY IN THE FOURTH DEGREE in violatkjn of Penal Law Sectton 165.45(2) in that on
or about October 25. 1994, in the County of Nassau and elsewhere, he, with intent to benefit himself or

383

a person other ttian an owner thereof or to impede the recovery by an owner thereof, knowingly possessed
stolen property, to wit: AT&T Mastercard.

PATTERN ACT ONE HUNDRED SIXTY-ONE
The defendant OLUSHINA GODWIN ADEKANBI. committed the crime of CRIMII^AL POSSESSION
OF STOLEN PROPERTY IN THE FOURTH DEGREE in violation of Penal Law Section 165.45(2) in that on
or about October 25, 1994, in the County of Nassau and elsewhere, he, with intent to benefit himself or
a person other than an owner thereof or to impede the recovery by an owner thereof, knowingly possessed
stolen property, to wit: American Express Optima Card.

PATTERN ACT ONE HUNDRED SIXTY-TWO
The defendant OLUSHINA GODWIN ADEKANBI, acting in concert with others, committed the crime
of CRIMINAL POSSESSION OF STOLEN PROPERTY IN THE FIFTH DEGREE in violation of Penal Law
Sectnn 165.40 in that on or about October 25, 1994, in the County of Nassau and elsewhere, he, with
intent to benefit himself or a person other than an owner thereof or to impede the recovery by an owner
thereof, knowingly possessed stolen property, to wit: Fretter invoices.

PATTERN ACT ONE HUNDRED SIXTY-THREE
The defendant OLUSHINA GODWIN ADEKANBI. comitted the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE in vkilation of Penal Law Sectnn 170.25, in that
on or atx>ut October 25, 1995. in the County of Nassau and elsewhere, he, with knowledge that it was
forged and with Intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a written instrument officially issued or created by a public office, public servant or govemmental
instrumentality.

PATTERN ACT ONE HUNDRED SIXTY-FOUR

The defendant OLUSHir^ GODWIN ADEKANBI, comitted the crime of CRIMINAL POSSESSION

OF A FORGED INSTRUMENT IN THE SECOND DEGREE in vkilatbn of Penal Law Section 170.25. in that

on or about October 25, 1995, in the County of Nassau and elsewhere, he, with knowledge that It was

forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to

384

wit: a written instrument officially issued or created by a public office, public sen/ant or governmental
instrumentality.

PATTERN ACT ONE HUNDRED SIXTY-FIVE

The defendant OLUSHINA GODWIN ADEKANBI, acting in concert with others, committed the crime
of CRIMINAL POSSESSION OF COMPUTER RELATED MATERIAL in violation of Penal Uw Section 156.35.
in that on or about October 25, 1994. in the County of Nassau and elsewhere, he, when having no right
to do so. knowingly possessed, in any form, any copy, reproduction, or duplicate of any computer data
or computer program, which was copied, reproduced, or duplicated in violation of Section 156.30 of this
article, with an intent to commit, or attempt to commit, or further the commission of any felony, with intent
to benefit himself, or a person other than an owner thereof.

PATTERN ACT ONE HUNDRED SIXTY-SIX

The defendant OLUSHINA GODWIN ADEKANBI. acting in concert with each other and others,
committed the crime of CRIMINAL POSSESSION OF COMPUTER RELATED MATERIAL in violation of Penal
Law Section 156.35 in that on or about October 25, 1994, in the County of Nassau and elsewhere, he.
when having no right to do so. knowingly possessed, in any form, any copy, reproduction, or duplicate
of any computer data or computer program, which was copied, reproduced, or duplicated in vblatbn of
Section 156.30 of this article, with an intent to commit, or attempt to commit, or further the commission
of any felony, with Intent to benefit himself, or a person other than an owner thereof.
PATTERN ACT ONE HUNDRED SIXTY-SEVEN

The defendant OLUSHINA GODWIN ADEKANBI. committed the crime of PETIT LARCENY in
violation of Penal Law Sectk>n 155^5. in that on or about June 13, 1995, In the County of New York and
elsewhere, he stole property.

PATTERN ACT ONE HUNDRED SIXTY-EIGHT

The defendant OLUSHINA GODWIN ADEKANBI. and PRINCE DELE OSIBOTE. acting in concert
with each other and others, committed the crime of ATTEMPTED PETIT LARCENY in vk)latk)n of Penal Law

385

Sections 110.00/155^5, in ttiat on or about and between September 1 , 1995 and Septemt>er 9, 1995, in
the County of Queens and elsewhere, they attempted to steal property.

PATTERN ACT ONE HUNDRED SIXTY-NINE
The defendants OLUSHINA GODWIN AOEKANBI. PRINCE DELE OSIBOTE, ROTtMl OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25 in that on or
about and between September 8. 1994 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument.

PATTERN ACT ONE HUNDRED SEVEMTY
The defendants OLUSHINA GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal Law Section 170.25 in that on or
at>out and between August 28. 1995 and September 10, 1995, in the County of Queens and elsewhere,
they, with knowledge that It was forged and with intent to defraud, deceive or injure arKJther, uttered or
possessed a forged ratrument

PATTERN ACT ONE HUNDRED SEVEWTY-ONE
The defendants OLUSHINA GODWIN AOEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI,
acting in concert with each other and others, committed the crime of GRAND LARCENY IN THE FOURTH
DEGREE in violation of Penal Law Secton 155.30(1) in that on or about and between July 25, 1995 and
September 10, 1995. in the County of Queens and elsewhere, they, stole property whose value exceeded
one thousand i

PATTERN ACT ONE HUNDRED SEVENTY-TWO

The defendant MICHAEL ATAMOLOGUN, acting in concert with others, committed the crime of
CRIMINAL POSSESSION OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal

386

Law Section 170^5 in that on or at>out July 11, 1995, in the County of Kings and elsewhere, he, with
knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or possessed
a forged instrument, to wit: a written instrument officially issued or created by a public office, public servant
or governmental instrumentality.

PATTERN ACT ONE HUNDRED SEVEKTrV-THREE

The defendant MICHAEL ATAMOLOGUN, acting in concert with others, committed the crime of
CRIMINAL POSSESSION OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Penal
Law Section 170,25 in that on or about and between July 15, 1995 and July 19, 1995, in the County of
Kings and elsewhere, he, with knowledge that it was forged and with intent to defraud, deceive or injure
another, uttered or possessed a forged instrument, to wit: a written instrument officialty issued or created
by a public office, public servant or governmental instrumentality.

PATTERN ACT ONE HUNDRED SEVENTY-FOUR

The defendant MICHAEL ATAMOLOGUN, acting in concert with others, committed the crime of
CRIMINAL POSSESSION OF A FORGED INSTRUMEt^ IN THE SECOND DEGREE in vblatkjn of Penal
Law 170.25 in that on or about June 30. 1995, in the County of Kings and elsewhere, he,
with knowledge that it was forged and with intent to defraud, deceive or injure another, uttered or
possessed a forged instrument, to wit: a commercial instrument or other instrument which does or may
evidence, create, transfer, terminate or otherwise affect a legal right, interest, obllgatk}n or status, to wit:
a credit card.

PATTERN ACT ONE HUNDRED SEVENTY-nVE

The defendant MICHAEL ATAMOLOGUN, acting in concert with others, committed the crime of
CRIMINAL POSSESSION OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Pelan
Law 170.25 in that on or about and between July 15, 1995 and July 19, 1995, in the County of Kings and
elsewhere, he, with knowledge that it was forged and with Intent to defraud, deceive or injure another,
uttered or possessed a forged instrument, to wit: a commercial Instrument or other instrument which does
or may evkjence. create, transfer, terminate or otherwise affect a legal right, interest, obligation or status,

387

to w)t: a credit card.

PATTERN ACT ONE HUNDRED SEVENTY-SIX

The defendant MICHAEL ATAMOLOGUN, acting in concert witti others, committed the crime of
CRIMINAL POSSESSION OF A FORGED INSTRUMENT IN THE SECOND DEGREE in violation of Pelan
Law 170.25 in that on or at>out and between June 30. 1995 and July 19. 1995, in the County of Kings and
elsewhere, he, with knowledge that it was forged and with intent to defraud, deceive or injure another,
uttered or possessed a forged instrument, to wit: a commercial instrument or other instrument which does
or may evidence, create, transfer, terminate or otherwise affect a legal right, interest, obligation or status,
to wit: a credit card.

PATTERN ACT ONE HUNDRED SEVENTY-SEVEN
The defendant MICHAEL ATAMOLOGUN. acting in concert with others, committed the crime of
CRIMINAL POSSESSION OF A FORGED INSTRUMEf^ IN THE SECOND DEGREE in violation of Pelan
Law 170.25 in that on or at>out and between July 15, 1995 and July 19. 1995. in the County of Kings and
elsewhere, he, with knowledge that it was forged and with intent to defraud, deceive or injure another,
uttered or possessed a forged instrument, to wit: a commercial instrument or other instrument which does
or may evidence, create, transfer, terminate or othenvlse affect a legal right, interest, obllgatkin or status,
to wit: a credit card.

PATTERN ACT ONE HUNDRED SEVENTY-EIGHT
The defendant MICHAEL ATAMOLOGUN. acting in concert with others, committed the crime of
GRAND LARCENY IN THE FOURTH DEGREE, in violation of Penal Law Sectwn 155.30(1), in that on or
about June 30. 1995. in the County of the Kings and in Branford. Connecticut, he stole property whose
value exceeded one thousand dollars.

PATTERN ACT ONE HUNDRED SEVENTY-NINE
The defendant MICHAEL ATAMOLOGUN. acting in concert with others, committed the crime of
GRAND LARCENY IN THE FOURTH DEGREE, in violation of Penal Law Sectk>n 155.30(1), in that on or

388

about July 11 , 1 995, in the County of the Kings and in Guilford, Connecticut, he stole property whose value
exceeded one thousand dollars.

PATTERN ACT ONE HUNDRED EIGHTY
The defendant MICHAEL ATAMOLOGUN, acting in concert with others, committed the crime of
GRAND LARCENY IN THE FOURTH DEGREE, in violation of Penal Law Section 155.30(1), in that on or
about July 15, 1995, in the County of the Kings and in Niantic, Connecticut, he stole property whose value
exceeded one thousand dollars.

PATTERN ACT ONE HUNDRED EIGHTY-ONE
The defendant MICHAEL ATAMOLOGUN, acting in concert with others, committed the crime of
GRAND LARCENY IN THE FOURTH DEGREE, in violation of Penal Law Section 155.30(1), in that on or
about July 18, 1995, in the County of the Kings and in Old Lyme, Connecticut, he stole property whose
value exceeded one thousand dollars

PATTERN ACT ONE HUNDRED EIGHTY-TWO
The defendant MICHAEL ATAMOLOGUN, acting in concert with others, committed ttie crime of
GRAND LARCENY IN THE FOURTH DEGREE, in violation of Penal Law Section 155.30(1), in that on or
about July 19. 1995. in the County of the Kings and in Waterford, Connecticut, he stole property whose
value exceeded one thousand dollars

PATTERN ACT ONE HUNDRED EIGHTY-THREE
The defendant MICHAEL ATAMOLOGUN. acting in concert with others, committed the crime of
GRAND LARCENY IN THE FOURTH DEGREE, in violation of Penal Law Section 155.30(1). in that on or
about July 19, 1995. in the County of the Kings and in Waterford, Connecticut, he stole property whose
value exceeded one thousand dollars

PATTERN ACT ONE HUNDRED EIGHTY-FOUR

The defendant MICHAEL ATAMOLOGUN, acting in concert with others, committed the crime of
GRAND LARCENY IN THE FOURTH DEGREE, in violation of Penal Law Section 155.30(1). in that on or

389

about July 19, 1995, in the County of the Kings and in Groton, Connecticut, he stole property whose value
exceeded one thousand dollars.

PATTERN ACT ONE HUNDRED EIGHTY-FIVE

The defendant MIChHAEL ATAMOLOGUN. acting in concert with others, committed the crime of
GRAND LARCENY IN THE FOURTH DEGREE, in violation of Penal Law Section 155.30(1), in that on or
about July 25, 1995, in the County of the Kings and in Mystic, Connecticut, he stole property whose value
exceeded one thousand dollars.

SECOND COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI. ADINDELE OSHODIofthe crime of CONSPIRACY
IN THE FIFTH DEGREE committed as follows:

The defendants, and others known and unknown to the Grand Jury, from on or about October 1 ,
1994 to on or about September 10. 1995, in the County of Queens and elsewhere, with intent that conduct
constituting a fek>ny, to wit: Scheme to Defraud in the First Degree, be performed, agreed with one or
nrmre persons to engage in or cause the performance of such conduct.

It was a purpose of this conspiracy to acquire money, goods and services through the operatnn
of an unlawful enterprise which acquired, possessed, manufactured, distributed and used stolen and
counterfeit credit cards. At all times relevant to this indictment, defendant OLUSHINA GODWIN ADEKANBI,
supervised this credit card enterprise, which consisted of a kication in Queens and other kxstnns.

As part of this conspiracy, defendant PRINCE DELE OSIBOTE worked as the second in command
in the credit card enterprise, thereby supervising the operatkin of the enterprise and meeting with or
speaking regularly with defendant OLUSHINA GODWIN ADEKANBI.

As part of this conspiracy, defendant ROTIMI OGUNNUSI acted as a principal in the credit card

390

enterprise, meeting regularly with defendants OLUSHINA GODWIN AOEKANBI and PRINCE DELE
OSIBOTE.

As part of this conspiracy, defendant MICHAEL ATAMOLOGUN acted as a nnanager of the credit
card enterprise obtaining cash advances and goods for defendants OLUSHINA GODWIN ADEKANBI and
PRINCE DELE OSIBOTE and recruiting others to obtain cash advances and goods for himself and for said
defendants using stolen and counterfeit credit cards. Defendant MICHAEL ATAMOLOGUN also brokered
sales of counterfeit credit cards manufactured by defendants OLUSHINA GODWIN ADEKANBI. PRINCE
DELE OSIBOTE or ROTIMI OGUNNUSI to other members and customers of the enterprise.

As part of this conspiracy. OLANREWAJU ADEYEMI. SAMUEL ADEWALE and MARY OYETUGA
and others used stolen or counterfeit credit cards aiKf false Identification to obtain cash advances and
goods for the credit card enterprise and themselves.

As part of this conspiracy, AKINDELE OSHODI provided store invoices belonging to Fretter. an
appliance store chain located in Massachusetts, and which invoices contained credit card access numbers
of customers of Fretter. to OLUSHINA GODWIN ADEKANBI and others working in the above mentnned
credit card enterprise.

OVERT ACTS

In furtherance of the conspiracy and to effect the objects thereof, and during the course thereof,
the following overt acts, among others, were committed:

( 1 ) On or atK>ut August 1 , 1 995. Apartment 9M at 1 64-20 Highland Avenue, Jamaica,
Queens, New York was rented In the name of "Rhonda Freeman*.

(2) On or about September 10, 1995, in the County of Queens, the defendants, acting
in concert with each other and others, possessed in excess of five hundred credit card access numbers
assigned to Individuals other than the defendants and others acting in concert with them.

(3) On or atx>ut September 10, 1995 in the County of Queens, the defendants, acting
in concert with each other and others, possessed in excess of fifty stolen credit cards.

(4) On or about September 10, 1995 in the County of Queens, the defendants, acting

391

in concert wtth each other and others, possessed in excess of fifty counterfeit credit cards.

(5) On or about September 10. 1995. in Jamaica. Queens, the defendants, acting in
concert with each other and others, possessed in excess of 500 store invoices of Fretter. an appliance
store chain located in Massachusetts.

(6) On or atxjut and between July 21 . 1994 and July 1 , 1995, in the County of Kings
and the State of Massachusetts and elsewhere. AKINDELE OSHODI possessed store invoices of Fretter.

(7) On or at>out September 10. 1995. in Jamaica, Queens, the defendants, acting In
concert with each other and others, possessed in excess of fifty store Invoices of Budget Car and Truck
Rental from Warwick. Rhode Island.

(8) On or about September 10, 1995, in Jamaica, Queens, the defendants, acting In
concert with each other and others, possessed twenty invoices of WLF Automotive, a gasoline station in
Evanston, Illinois.

(9) On or about September 10, 1995, in Jamaica, Queens, the defendants, acting in
concert with each other and ottiers. possessed a portable embossing machine.

(10) On or about Septemt>er 10. 1995, In Jarrwuca, Queens, the defendants, acting in
concert with each ottwr and others, possessed a portable tipping rrtachine.

(11) On or alxxjt September 10. 1995, in Jamaica, Queens, the defendants, acting in
concert with each other and others, possessed a portable encoding machine.

(12) On or at>out Septemt>er 10. 1995 in Jamaica Queens, the defendants, acting in
concert with each other and others, possessed Universal Bank convenience checks in the name of 'Jay
Weaver*.

(13) On or about September 10, 1995 in Jamaica, Queens, SAMUEL ADEWALE, acting
in concert with others, possessed Budget Car and Truck Rental invoice #GONAA2414130.

(14) On or about and between September 8, 1995 and September 10, 1995, in
Jamaica, Queens. ROTIMI OGUNNUSI. acting in concert with others, possessed Budget Car and Truck
Rental invoice #PVDAA5702964

392

(15) Un oraoout beptetnoer 10, 1995, in Jamaica, Queens, ROTIMI OGUNNUSI, acting
in concert with others, possessed a Bank One VISA credit card in the name of 'John Paul Barr.

(16) On or about September 10, 1995, in Jamaica, Queens, OLUSHINA GODWIN
ADEKANBI, acting in concert with others, possessed an Arizona driver's license in the name of JOHN P
BARR".

(18) On or about September 10, 1995. in Jamaica, Queens, MARY OYETUGA, acting
in concert with others, possessed a "State of Massachusettes* [sic] identification card in the name 'Mary
Olesanya*.

(19) On or about September 10, 1995, in Jamaica, Queens. MARY OYETUGA, acting
in concert with others, possessed a J.C. Penny credit card in the name of 'Linda Moore'.

(20) On or about September 10, 1995, in Jamaica, Queens, ROTIMI OGUNNUSI, acting
in concert with others, possessed a list of equipment wtiich can be used to manufacture credit cards.

(21 ) On or about July 30, 1995 and Septemtrar 10, 1995, in the County of Queens and
elsewhere, the defendants, acting In concert with each other and others, possessed a cellular telephone
encoded with AT&T Wireless mobile identification number 917-853-3645.

(22) On or about August 27, 1995, in Jamaica, Queens, merchandise was purchased
from Incredible Floors Corp. using a VISA credit card in the name of 'Mark Dunlop'.

(23) On or about Septemt>er 10. 1995 in Jamaica, Queens, OLUSHINA GODWIN
ADEKANBI, acting in concert with others, possessed a New Jersey driver's license in the name of 'Daniel
Yemkin".

(24) On or about June 13, 1995, OLUSHINA GODWIN ADEKANBI purchased a Sharp
pocket orgemizer from Staples in New York, New York, using a VISA credit card in the name of 'Daniel

393

Yemkin*.

(25) On or about September 9. 1995. OLANREWAJU ADEYEMI.

a/K/a FLORENCE JAMERSON, acting in concert with others, purchased merchandise from Staples in
Jamaica, Queens using a Diamond Prestige VISA credit card in the name of 'Laura WinsloW.

(26) On or about September 9, 1995, in the County of Queens and elsewhere.
OLANREWAJU ADEYEMI. acting in concert with others, possessed a New York driver's license in the name
of 'Laura Winstow*.

(27) On or at>out and between June 21, 1995 and September 10. 1995, in Jamaica,
Queens and elsewhere, PRINCE DELE OSIBOTE possessed a Virginia driver's license in the name of
•RICHARD RAIVISEY".

(28) On or about June 21 , 1 995, commercial mail box #184 was rented at 207 E. Ohio,
Chicago, Illinois in the name of "Richard Ramsey*.

(29) On or about August 1 , 1995, commercial mail box #128 was rented at 207 Church
Avenue, Brooklyn, New York.

(30) On or about September 1, 1995, commercial mail t>ox #148 was rented at 207
Church Avenue. Brooklyn. New York.

(31) Onoratxjut August28. 1995, a change ofaddress letter for the Integra Bank VISA
credit card account of Terry Lee Hrrtz was faxed from Forest Hills, Queens to sakj credit card institution.

(32) On or about August 28. 1995, a U.S. Post Office cfiange of address card for Daniel
Hunnel was mailed from Queens. New York.

(33) On or about August 1 . 1 995, a U.S. Post Office change of address card for Bettye
WakJen was mailed from Brooklyn. New York.

(34) On or about August 1 , 1 995. a U.S. Post Office change of address card for William
Whitworth was mailed from Brooklyn, New York.

(35) On or about September 10, 1995, in Jamaica, Queens, the defendants, acting in
concert with each other and others, possessed Chemical Bank convenience checks in the name of V/illiam

394

J. Whitworth'.

(36) On or about September 10, 1995, in Jamaica, Queens, the defendants, acting in
concert with each other and others, possessed a Chemical Banl< Mastercard credit card in the name of
"Bettye W. Walden".

(37) On or about October 25, 1994. in the County of Nassau and elsewhere, OLUSHINA
GODWIN AOEKANBI possessed store invoices of Fretter.

(38) On or about October 25, 1 994, in the County of Nassau and elsewhere, OLUSHINA
GODWIN ADEKANBI possessed what purported to be a VISA credit card of NBD Bancorp.

(39) On or about October 25, 1994, intho County of Nassau and elsewhere, OLUSHINA
ADEKANBI possessed a cloned cellular telephone.

(40) On or about October 25, 1994,intheCountyofNassauandelsewhere, OLUSHINA
GODWIN ADEKANBI possessed a Wachovia VISA credit card in the name of 'Luther Howard*.

(41) On or about October 25, 1 994, in the County of Nassau and elsewhere, OLUSHINA
GODWIN ADEKANBI possessed a Natlonsbank VISA credit card in the name of 'Luther Howard'.

(42) On or atx>ut October 25, 1994 in the County of Nassau and elsewhere, OLUSHINA
GODWIN ADEKANBI possessed a Nev/ Jersey driver's license in the name of 'Luther Howard*.

(43) On or aboui May 1 1 . 1995, in the County of Kings and elsewhere, OLUSHINA
GODWIN ADEKANBI possessed a counterfeit VISA credit card in the name of 'Emanuel Jones'.

(44) On or about May 11. 1995, in Fort Lee, New Jersey, OLUSHINA GODWIN
ADEKANBI , acting in concert with another, attempted to obtain a cash advance in the amount of $2000.00
from Natwest Bank using a counterfeit VISA credit card in the name of "Emanuel Jones'.

(45) On or about and between June 30, 1995, in the County of Kings and elsewhere,
MICHAEL ATAMOLOGUN. acting in concert with others, possessed a New Jersey driver's license in the
name of 'Mark D Morris*

(46) On or about June 30. 1995. in the County of Kings and elsewhere, MICHAEL
ATAMOLOGUN, acting in concert with others, possessed a VISA credit card in the name of "Mark D.

395

Morris*.

(47) On or about and between July 15, 1995 and August 11, 1995, in the County of
Kings and eisewtfere. MICHAEL ATAMOLOGUN. acting in concert with others, possessed a New York
driver's license in the name of "David Sherman*.

(48) On or about and between July 15, 1995 arKl July 19, 1995, in the County of Kings
and elsewhere, MICHAEL ATAMOLOGUN, acting in concert with others, possessed a VISA credit card In
the name of *David Sherman*.

(49) On or about and between July 15, 1995 and July 19, 1995, in the County of Kings
and elsewhere, MICHAEL ATAMOLOGUN, acting in concert with others, possessed a VISA credit card in
the name of 'Joseph Ward*.

(50) On or atXMJt and between July 15, 1995 and July 19, 1995. in the County of Kings
and elsewhere, MICHAEL ATAMOLOGUN, acting in concert with others, possessed a VISA credit card in
the name of 'Stanley Johnson*.

(51) On or about June 30, 1995. in Branford, Connecticut, MICHAEL ATAMOLOGUN,
obtained a cash advance in the amount of $2525.00 from Branford Savings Bank, using a VISA credit card
in the name of 'Stanley Johnson'.

(52) On or about July 11. 1995. in Guilford. Connecticut, MICHAEL ATAMOLOGUN
obtained a cash advance In the amount of S2800.00 from the New Haven Savings Bank using a VISA card
in the name of 'Mark D. Morris'.

(53) On or about July 15. 1995 in Niantic, Connecticut, MICHAEL ATAMOLOGUN
obtained a cash advance in the amount of S3000.00 from Chelsea Groton Savings Bank using a VISA
credit card in the name of 'David Sherman*.

(54) On or about July 18, 1995. in OM Lyme. Connecticut, MICHAEL ATAMOLOGUN
obtained a cash advance in the amount of $3000.00 from the Maritime Bank and Trust in Niantic,
Connecticut, using a VISA credit card in the name of 'Stanley Johnson'.

(55) On or about July 19. 1995. in Waterford, Connecticut. MICHAEL ATAMOLOGUN

396

obtained a cash advance in the amount of $2900.00 from Citizens Bank using a VISA Credit Card in the
name of "Joseph Ward".

THIRD COUMT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI, AWNDELE OSHODI of the crime of SCHEME TO
DEFRAUD IN THE FIRST DEGREE committed as follows:

The defendants, acting in concert with each other and others, on or atxiut and between October
1, 1994 and September 10, 1995. in the County of Queens and elsewhere, engaged In a scheme
constituting a systematic ongoing course of conduct with intent to defraud ten or more persons or to
obtain property from ten or more persons by false or fraudulent pretenses, representations or promises,
and so obtained property, to wit: United States Currency, from at least one such person whose identity
is known to the Grand Jury.

FOURTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI ofthe crime ofGRAND LARCENY IN THE SECOND
DEGREE, committed as folkiws:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and September 10. 1995. in the County of Queens and elsewhere, stole property whose value
exceeded fifty thousand dollars.

FIFTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL

397

ADEWALE, MARYOYETUGA. OLANREWAJU AOEYEMI ofthocrimo of GRAND LARCENY IN THE SECOND
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1 . 1 994 and September 10.1 995. in the County of Queerts and elsewhere, stole property whose value fifty
exceeded fifty thousand dollars.

SIXTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAf*/IUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI otthe crime of GRAND LARCENY IN THE SECOND
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and Septemt>er 10, 1995. in the County of Queens and elsewhere, stole property whose value
exceeded fifty thousand dollars.

SEVENTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MIChlAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU AOEYEMI of the crime of GRAND LARCENY IN THE SECOND
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and September 10, 1995, in the County of Queens and elsewhere, stole property whose value
exceeded fifty ttiousand dollars.

EIGHTH COUNT
The Grand Jury of the County of Queans, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU AOEYEMI of the crime of GRAND LARCENY IN THE SECOND
DEGREE, committed as follows:

398

The defendants, acting in cxmcert witti each ottwr and others, on or atxMJt and between October
I, 1994 and Septemt>er 10. 1995. In the County of Queens and elsewhere, stole property whose value
exceeded fifty thousand dollars.

NINTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU AOEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting In concert with each other and ottiers. on or about and between October
1. 1994 and September 10. 1995. in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

TENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBl. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1. 1994 and September 10, 1995. in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

ELEVENTH COUNT

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and September 10, 1995. in the County of Queens and elsewhere, stole property whose value

399

exceeded three thousand dollars.

TWELFTH COUNT
The Grand Jury of the County of Queens, by ttiis Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAt\^UEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1 , 1994 and September 10, 1995, in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

THIRTEENTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

FOURTEENTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1. 1994 and September 10. 1995. in ttie Courrty of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

RFTEENTH COUNT

400

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIfWII OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and September 10, 1995. In the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

SDCTEENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants 0LUSHIt4A
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and September 10, 1995. in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars

SEVENTEENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and September 10. 1995, in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

EIGHTEENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL

401

ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1. 1994 and September 10. 1995. in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

NINETEENTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

TWENTIETH COUNT
The Grbnd Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

TWENTY-FIRST COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

402

TWENTY-SECOND COUNT

TWENTY-THIRD COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows

TWENTY-FOURTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1. 1994 and September 10. 1995. in the County of Queens and elsewhere, stole property whose value

403

exceeded three thousand dollars.

TWEhTTY-FIFTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. f^^lCHAEL ATAf^OLOGUN, SAt^UEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

TWENTY-SIXTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. R0TII\4I OGUNNUSI, (MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting n concert with each other and others, on or atiout and between October
1, 1994 and September 10. 1995. n the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars

TWENTY-SEVENTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed at follows:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and Septemtier 10. 1995. m the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars

TWENTY-EIGHTH COUNT

404

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

TWENTY-NINTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and September 10, 1995, In the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

THIRTIETH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows

THIRTY-FIRST COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL

405

ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, commrtted as follows:

The defendants, acting in concert witti eacfi other and others, on or about and between October
1. 1994 and September 10, 1995. in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

THIRTY-SECOND COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants acting in concert with each other and others, on or about and between October
1. 1994 and September 10, 1995, in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollais.

THIRTY-THIRD COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

The defendants, acting m concert with each other and others, on or about and between October
1, 1994 and September 10. 1995. in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

THIRTY-FOURTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE THIRD
DEGREE, committed as follows:

406

The defendants, acting in concert with each other and others, on or about and between October
1, 994 and September 10, 1995, in the County of Queens and elsewhere, stole property whose value
exceeded three thousand dollars.

THIRTY-FIFTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE FOURTH
DEGREE, committed as follows: >

THIRTY-SIXTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCEfMY IN THE FOURTH
DEGREE, committed as follows

The defendants, acting in i^ncert with each other and others, on or about and between October
1, 1994 and September 10. 1995. in the County of Queens and elsewhere, stole property whose value
exceeded one thousand dollars.

THIRTY-SEVENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHIhJA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE FOURTH
DEGREE, committed as follows:

The defendants, acting In concert with each other and others, on or about and between October
1, 1994 and Septemt>er 10. 1995.^Jn the County of Queens and elsewhere, stole property whose value

407

exceeded one thousand doHars.

THIRTY-EIGHTH COUr^

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND URCENY IN THE FOURTH
DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and Septemtier 10. 1995. in the County of Queens and elsewhere, stole property whose value
exceeded one thousand dollars

THIRTY-NINTH COUNT
The Grand Jury at ttie County of Queens, by this indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE FOURTH
DEGREE, committed at follows:

The defendants, acting w\ concert with each other and others, on or about and between October
1, 1994 and September 10. 1995. m the County of Queens and elsewhere, stole property whose value
exceeded one thousar>d dollars

FORTIETH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE FOURTH
DEGREE, committed as follows:

The defendants, acbng in concert with each other and others, on or about and between October
1, 1994 and September 10. 1995. wt the County of Queens and elsewhere, stole property whose value
exceeded one thousand dollars.

408

FORTY-RRST COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE FOURTH
DEGREE, committed as follows:

FORTY-SECOND COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE FOURTH
DEGREE, committed as follows:

FORTY-THIRD COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHIfM
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCEffy IN THE FOURTH
DEGREE, committed as follows:

409

FORTY-FOURTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE FOURTH
DEGREE, committed as follows:

FORTY-RFTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of GRAND LARCENY IN THE FOURTH
DEGREE, committed as follows:

The defendants, acting In concert with each other and others, on or about and between October
1, 1994 and September 10. 1995. in the County of Queens and elsewhere, stole property whose value
exceeded one thousand dollars.

FORTY-SIXTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OUVNREWAJU ADEYEMI of the crime of PETIT LARCENY, committed as
follows:

The defendants, acting in concert with others, on or about and between October 1, 1994 and
September 10. 1995. in the County of Queens and elsewhere, stole property.

410

FORTY-SEVENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI. PRINCE DELE OSIBOTE. ROTIh/ll OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of PETIT LARCENY, committed as
follows:

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and September 10. 1995. in the County of Queens and elsewhere, stole property.

FORTY-EIGHTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of PETIT LARCENY, committed as
follows:

The defendants, acting in concert with each other and others on or about and between October
1. 1994 and September 10. 1994. in the County of Queens and elsewhere, stole property.

FORTY-NINTH COUNT

The defendants, acting in concert with each other and others, on or about and between October
1, 1994 and September 10. 1995. in the County of Queens and elsewhere, stole property.

RFTIETH COUNT

411

FORGERY DEVICES, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1 , 1 995 and September 10,1 995 in the County of Queens, possessed with knowledge of its character any
plate, die or other device, apparatus, equipment, or article specifically designed for use in to wit:
counterfeiting credit cards.

FIFTY-RRST COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OP
FORGERY DEVICES, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1 , 1995 and September 10, 1995 in the County of Queens, possessed with knowledge of its character any
plate, die or other device, apparatus, equipment, or article specifically designed for use In to wit:
counterfeiting credit cards.

FIFTY-SECOND COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF
FORGERY DEVICES, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1 , 1995 and September 10, 1995 in the County of Queens, possessed with knowledge of its character any
plate, die or other device, apparatus, equipment, or article specifically designed for use in to wit:
counterfeiting credit cards.

RFTY-THIRD COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL

412

ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, c»mmined as follows:

Tfie defendants, acting In concert with each other and others, on or at>out and between
June 13, 1995 and September 10, 1995, in the County of Queens and elsewhere, with knowledge that It
was forged and with Intent to defraud, deceive or injure another, uttered or possessed a forged instrument,
to wit: a written instrument officially issued or created by a public office, public servant or governmental
instrumentality.

RFTY-FOURTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between June 21 ,
1995 and September 10. 1995. In the County of Queens and elsewhere, with knowledge ttiat it was forged
and with intent to defraud, deceive or injure another, uttered or possessed a forged Instrument, to wit: a
written instrument officially Issued or created by a public office, public servant or govemmentaJ
instrumentality.

FIFTY-FIFTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as foltows:

The defendants, acting in concert with each other and others, on or about September 10,
1995, in the County of Queens and elsewhere, with knowledge tfiat it was forged and with intent to
defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a written instrument
officially issued or created by a public office, public servant or governmental instrumentality.

413

RFTY-SIXTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI. PRINCE DEL£ OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
AOEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about Septemt>er 10,
1995. in the County of Queens and elsewhere, with knowledge that it was forged and with intent to
defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a written instrument
officially issued or created by a public office, public servant or govemmental instrunrwntality.

FIFTY.SEVENTH COUNT
The Grand Jury ol the County of Queens, by this Indictment, accuses the defendants OLUSHIIMA
GODWIN ADEKANB). PRINCE DEL£ OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
AOEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, aetvtg in concert with each other and others, on or about September 10,
1995, in the County of Queens and eisewtiere. with knowledge that it was forged and with intent to
defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a written instrument
otficiaHy issued or created by a public office, public servant or govemmental instrumentality.

RFTY-EIGHTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBi. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about September 10.
1995, in the County of Queens and elsewhere, with krKiwIedge ttwt it was forged and with intent to

414

defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a written instrument
officially issued or created by a public office, public servant or governmental instrumentality.

RFTY-NINTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAlVlOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf«rr IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about September 1 0.
1995. in the County of Queens and elsewhere, with knowledge that it was forged and with intent to
defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a written instrument
officially issued or created by a public office, public servant or governmental instrumentality.

SIXTIETH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants
OLUSHINA GODWINADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAELATAMOLOGUN,
SAMUEL ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMIf^AL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or atxsut September 10,
1995, in the County of Queens and elsewhere, with knowledge that it was forged and with intent to
defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a written instrument
officially issued or created by a public office, public servant or governmental instrumentality.

SIXTY-RRST COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants
OLUSHII^GODWINADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSLMICHAELATAMOLOGUN.
SAMUEL ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION
OF A FORGED INSTURMEf^ IN THE SECOND DEGREE, committed as folkiws:

The defendants, acting in concert with each ottier and others, on or abouX September 10,

415

1995, In the County of Queens and elsewttere, with knowledge ttut It was torgwj and w«i Intent to
defraud, deceive or Injure anottier, uttered or possessed a forged Instrument, to wit: a written instrument
officially issued or created by a public office, public servant or govemmental Instrumentality.

SIXTY-SECOND COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants
OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, IWIICHAEL ATAMOLOQUN.
SAMUEL ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or atxMJt and between
August 1, 1995 and September 10, 1995, in the County of Queens and elsewhere, with knowledge that
it was forged and with intent to defraud, deceive or injure another, uttered or possessed a forged
instrument, to wit: a commercial instrument or other instrument which does or may evidence, create,
transfer, terminate or ottienwise affect a legal right, interest, obligation or status, to wit: a credit card.

SIXTY-THIRD COUNT
The Grand Jury of the County of Queens, by this lndk:tment, accuses the defendants
OLUSHINA GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN,
SAMUEL ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION
OF A FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1. 1995 and Septemt>er 10. 1995. in the County of Queens and elsewhere, with kr)owledge ttiat It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evkJence, create, transfer, terminate
or othenwise affect a legal right, interest, obligation or status, to wit: a credit card.

SIXTY-FOURTH COUNT
The Grand Jury of the County of Queens, by this Indkrtment. accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL

416

AOEWALE. MARY OYETUQA. OLANREWAJU AOEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting In concert with each other and others, on or about and between August
1, 199S and Septemtrar 10. 1995. in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or Injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

SHmr-FIFTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1. 1995 and September 10. 1995, in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evkjence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

SIXTY-SIXTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as folk>ws:

The defendants, acting in concert with each other and others, on or about and between August
1.1995 and September 10. 1995. in the County of Queens and elsewhere, witti knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate

417

or otherwise affect a legal right, interest, obligation or status, to wtt: a credit card.

SIXTY-SEVENTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants 0LUSHIh4A
GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MIChtAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1. 1995 and September 10. 1995. in the County of Queens and elsewhere, with kr>owledge tttat it was
forged and with intent to defraud, deceive or injure ar>other. uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

SIXTY-EIGHTH COUNT
The GrarKl Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as foHows:

The defendants, acting in concert with each other and others, on or about arid between August
1, 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure artother. uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal hght, interest, obligation or status, to wit: a credit card.

SIXTY-NINTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crinte of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

418

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and September 10. 1995. in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrunnent. to
wit: a commerciaJ instrument or other Instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right. Interest, obligation or status, to wit: a credit card.

SEVENTIETH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1. 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evklence. create, transfer, terminate
or othenvlse affect a legal right, interest, obligation or status, to wit: a credit card.

SEVENTY-FIRST COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FRGED INSTRUMENT IN THE SECOND DEGREE, committed as folkjws:

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and September 10. 1995. in the County of Queens and elsewhere, with knowledge Vhei It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other Irwtrument which does or may evKlence, create, transfer, terminate
or otherwise affect a legal right, interest, obligatnn or status, to wit: a credit card.

419

SEVENTY-SECOND COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crinrte of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or at>out and between August
1, 1995 and September 10. 1995. In the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a comnrwrcial instrument or other instrument which does or may evidence, create, transfer, temiinate
or otherwise affect a legal right, interest, obligation or status, to wK: a credit card.

SEVENTY-THIRD COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE OEL£ OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting m concert with each other and others, on or at>out and between August
1, 1995 and September 10, 1995. n the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or otfwr instrument which does or may evUence, create, trartsfer, terminate
or otherwise affect a legal right, interest, obligation and status, to wit: a credit card.

SEVENTY-FOURTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

420

The defendants, acting in concert with each other aiKl others, on or atxxjt and t>etween March 23,
1995 and September 10. 1995, in the County of Queens and elsewhere, with knowledge ttiat it was forged
and with Intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a
commercial instrument or other instrument which does or may evidence, create, transfer, terminate or
otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

SEVENTY-FIFTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHIIMA
GODWIN AOEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and t>etween June 19.
1995 and September 10. 1995. in the County of Queens arKJ elsewhere, with knowledge that it was forged
and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a
commercial instrument or other instrument which does or may evidence, create, transfer, terminate or
otherwise affect a legal right, interest, obligatkm or status, to wit: a credit card.

SEVEMTY-SIXTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as foltows:

The defendants, acting in concert with each other and others, on or atXHit and t>etween June 19.
1995 and September 10. 1995. in the County of Queens and elsewhere, with knowledge that it was forged
and with intent to defraud, deceive or injure ar>other, uttered or possessed a forged instrument, to wit: a
commercial instrument or other instrument which does or may evidence, create, transfer, terminate or
otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

421

SEVENTY-SEVENTH COUNT

The Grand Jury of the Courrty of Queens, by this Indictment, accuses the defendants OLUSHII^
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. D4ICHAEL ATAMOLOGUN. SAMUEL
AOEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crinne of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or atxxjt and between March 29,
1995 and Septemt>er 10. 1995. in the County of Queens and elsewhere, with knowledge ttwt it was forged
and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a
commerciaJ instrument or other instruntent which does or may evidence, create, transfer, terminate or
otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

SEVENTY-EIGHTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as foUows:

The defendants, acting in concert with each other arKi others, on or about and between August
1. 1995 and September 10. 1995. in the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

SEVENTY-NINTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crinw of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf>rr IN THE SECOND DEGREE, committed as follows:

422

The defendants, acting in concert with each ottier and ottiers. on or about and t>etween March 25.
1995 and Septemt>er 10. 1995. in the County of Queens and elsewhere, with Icnowledge that it was forged
and with intent to defraud, deceive or injure another, uttered or possessed a forged Instrument, to wit: a
commercial Instrument or other Instrument which does or may evidence, create, transfer, terminate or
otherwise affect a legal right. Interest, obligation or status, to wit: a credit card.

EIGHTIETH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHItMA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICKIAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or atxHit and between July 13,
1995 and September 10. 1995. In the County of Queens and elsewhere, with knowledge that It was forged
and with intent to defraud, deceive or Injure another, uttered or possessed a forged Instrument, to wit: a
commercial instrument or other instrument which does or may evidence, create, transfer, terminate or
otherwise affect a legal nght, interest, obligation or status, to wit: a credit card.

EIGHTY-FIRST COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf^ IN THE SECOND DEGREE, committed as foNows:

The defendants, acting in concert with each other and others, on or aix>ut and between June 22,
1995 and September 10. 1995. in the County of Queens and elsewhere, with knowledge tfiat It was forged
and with Intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a
commercial Instrument or other Instrument which does or may evidence, create, transfer, terminate or
otherwise affect a legal nght, interest, obligation or status, to wit: a credit card.

100

423

EIGHTY-SECOND COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the deferxlants OLUSHINA
GODWIN AOEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crinr»e of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or atxMJt en6 between August
1, 1995 and September 10, 1995, in ttte County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commerdai imtrument or ottier instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

EIGHTY-THIRD COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and betvraen August
1. 1995 and September 10. 1995, in the County of Queens and elsewhere, with knowledge tfiat it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument whk:h does or may evidence, create, transfer, terminate
or othenwise affect a legal right, interest, obligation or status, to wit: a credit card.

EIGHTY-FOURTH COUNT
The Grarxl Jury of the County of Queens, by this Indictment, accuses ttte defendants OLUSHINA
GODWIN AOEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as folksws:

Ifil

424

The defendants, acting in concert witti each other and others, on or about and between August

1, 1995 and September 10, 1995, in the County of Queens and elsewhere, with knovAedge that It was

forged and with intent to defraud, deceive or Injure another, uttered or possessed a forged Instrument, to

■ wit: a commercial instrument or other instrument which does or may evidence, create, transfer, temfiinate

or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

EIGHTY-FIFTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAft/IOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and September 10, 1995. In the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged Instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or othenwise affect a legal right, interest, obligation or status, to wit: a credit card.

EIGHTY-SIXTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMIf^AL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1. 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligatkin or status, to wit: a credit card.

EIGHTY-SEVENTH COUNT

102

425

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI. PRINCE OELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
AOEWALE, MARY OYETUGA, OLANREWAJU AOEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or at>out and between November
24, 1994 and September 10. 1995. in the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wtt: a credit card.

EIGHTY-EIGHTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting tn concert with each other and others, on or atraut and between June 22,
1995 and September 10. 1995. in the County of Queens and elsewhere, with knowledge tfiat it was forged
and with intent to defraud, deceive or niure arwlher. uttered or possessed a forged instrument, to wit: a
commercial instrument or other instniment which does or may evkJence, create, transfer, terminate or
otherwise affect a legal right, interest, obligaton or status, to wit: a credit card.

EIGHTY-NINTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI. PRINCE DEL£ OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or abOiA and between March 1 ,
1995 and September 10. 1995. in the County of Queens and elsewhere, with knowledge tfiat it was forged

ifiS

426

and with intent to defraud, deceive or injure anottier. uttered or possessed a forged instrument, to wit: a
commercial instrument or other Instrument which does or may evidence, create, transfer, terminate or
otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

NINETIETH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI, PRINCE DELE OSIBOTE, ROUMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and September 10, 1995, in the County of Queens and elsewhere, with knowledge ttiat it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercia) instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

NINETY-RRST COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENTT IN THE SECOND DEGREE, committed as follows:

The deferKlants. acting In concert with each other and crthers, on or at>out and t>etween August
1, 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge ttiat it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evMence, create, transfer, termirwte
or otherwise affect a legal right, interest, obligaton or status, to wit: a credit card.

NINETY-SECOND COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL

104

427

AOEWALE. MARY OYETUGA. OLANREWAJU AOEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf^ IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and September 10. 1995, in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or Injure another, uttered or possessed a forged instrument, to
wit: a commercial Instrument or other Instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

NINETY-THIRD COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMIf^AL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1. 1995 and September 10. 1995. In the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

NINETY-FOURTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as folk>ws:

The defendants, acting in concert with each other and others, on or about and tietween August
1, 1995 and September 10. 1995. in the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument whk:h does or may evidence, create, transfer, terminate

195

428

or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

NINETY-nFTH COUNT

The Grand Jury of the County of Queens, by this Indictnient. accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
AOEWALE. MARY OYETUGA. OLANREWAJU AOEYEMI of the crime of CRIMIt^AL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and Septemtwr 10, 1995. in the County of Queens and elsewhere, with tcnowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, termirutte
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

NINETY-SIXTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODV\nN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMi of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf^ IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and t>etween July 3.
1995 and Septemt>er 10. 1995. In the County of Queens and elsewhere, with knowledge tfwt it was forged
and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to wit: a
commercial instrument or other instrument which does or may evidence, create, transfer, terminate or
othenwise affect a legal right, interest, obligation or status, to wit: a credit card.

NINETY-SEVENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as foHows:

106

429

The defendants, acting in concert witti each other and others, on or atx>ut and between August
1. 1995 and September 10, 1995, in the County of Queens and elsewhere, with Icnowtedge that it was
forged and with intent to defraud, deceive or Injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

NINETY-EIGHTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU AOEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEirr IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1. 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge that It was
forged and with Intent to defraud, deceive or Injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other Instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.

NINETY-NINTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMIf^AL POSSESSION OF A
FORGED INSTRUMEIvfT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and Septemt>er 10, 1995, In the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or othenwise affect a legal right, interest, obligation or status, to wit: a credit card.

ONE HUNDREDTH COUNT

430

The Grand Jury of Ihe County of Queens, by this Indictment, accuses the defendants OLUSHIfNlA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1. 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge ttiat it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrunnent, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-RRST COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or atxMJt artd t>etween August
1, 1995 and Septemt>er 10. 1995. in the County of Queens and elsewhere, with knowledge tfiat it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged irtstrument, to
wit: a commercial instrument or other instrument which does or may evkJence, create, transfer, terminate
or otherwise affect a legal right. Interest, obligation or status, to wit: a credit card.
ONE HUNDRED-SECOND COUNT

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge that It was

IfiS

431

forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-THIRD COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIlWll OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMIf^AL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or aboiA and between August
1, 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial Instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-FOURTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMII^AL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting In concert with each other and others, on or about and between September
5, 1995 and September 10. 1995. in the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged Instrument, to
wit: a commercial irwtrument or other mstruntent which does or may evidence, create, transfer, terminate
or othenwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-HFTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHIfvIA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL

109

432

ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMt of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between July 1 .
1995 and Septemt>er 10, 1995, in the County of Queens and elsewhere, with knowledge that It was forged
and with intent to defraud, deceive or injure artother. uttered or possessed a forged instrument, to wit: a
commercial instrument or other instrument which does or may evidence, create, transfer, terminate or
otherwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-SIXTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHir<iA
GODWIN ADEKANBI, PRINCE DEi^ OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf4T IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or atxxjt and between December
19, 1994 and September 10. 1995, in the County of Queens and elsewhere, with knowledge that it was
forged and with Intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commerciaJ Instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-SEVENTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as foHows:

Tfte defendants, acting in concert with each other and ottters, on or about ar>d between August
1, 1995 and Septemt>er 10. 1995. in the County of Queens and elsewhere, with knowledge tfiat It was
forged and with intent to defraud, deceive or injure arKither, uttered or possessed a forged instrument, to
wit: a commercial Instrument or other instrument which does or may evidence, create, transfer, terminate

110

433

or othenvise affect a legal rigfit, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-EIGHTH COUNT

The Grand Jury of ttie County of Queens, by ttiis Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI GGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEIvn IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or atxiut and between August
1, 1995 and September 10, 1995, in the County of Queens and elsewhere, with knowledge ttiat it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or othenvise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-NINTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMIt^AL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting In concert with each other and others, on or about and between August
1, 1995 and September 10, 1995, in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or Injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or othenwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-TENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHIfJA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTiMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEf^ IN THE SECOND DEGREE, committed as foikiws:

111

434

The defendants, acting in concert vvtth each other and others, on or atxxit and t>etween July 15.
1995 and September 10, 1995. In the County of Queens and elsewhere, with Imowledge that K was forged
and with intent to defraud, deceive or Injure anther, uttered or possessed a forged Instrunrfent. to wit: a
oonrunercial instrunient or other instrument which does or may evidence, create, transfer, terminate or
othenwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-ELEVENTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and Septemt>er 10. 1995. in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-TWELFTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE. MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMIfMAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between November
3, 1994 and September 10. 1995. in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrunient, to
wit: a commercial instrument or other instrument which does or may evkJence, create, trartsfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-THIRTEENTH COUNT

112

435

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSIHINA
GODWIN AOEKANBi, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMIf^AL POSSESSION OF A
FORGED INSTRUMENTT IN THE SECOND DEGREE, committed as follows:

The defendants, acting In concert with each other and others, on or about and between August
1, 1995 and September 10, 1995. In the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged Instrument, to
wit: a commercial instrument or oth^r instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status, to wit: a credit card.
ONE HUNDRED-FOURTEENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or at)out and between August
1 , 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge that it was
forged and with intent to defraud, (^celve or injure another, uttered or possessed a forged instrument, to
wit: a commercial instrument or other instrument which does or may evkjence. create, transfer, termirtate
or otherwise affect a legal right, interest. obligatk>n or status, to wit: a credit card.
ONE HUNDRED-FIFTEENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMIt>4AL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as folk>ws:

The defendants, acting in concert with each other and others, on or about and between August
1. 1995 and September 10, 1995,.tn the County of Queens and elsewhere, with knowledge that it was

436

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAI^UEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMEhJT IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between August
1, 1995 and September 10, 1995. in the County of Queens and elsewhere, with knowledge that It was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged Instrument, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest, obligation or status.

ONE HUNDRED-SEVENTEENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MAPy OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF A
FORGED INSTRUMENT IN THE SECOND DEGREE, committed as follows:

The defendants acting in concert vnth each other and others, on or about and between August
1, 1995 and Septemtwr 10, 1995. in the County of Queens and elsewhere, with knowledge ttiat it was
forged and with intent to defraud, deceive or injure another, uttered or possessed a forged instrunnent, to
wit: a commercial instrument or other instrument which does or may evidence, create, transfer, terminate
or otherwise affect a legal right, interest. obligat»n or status, to wit: a credit card.
ONE HUNDRED-EIGHTEENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL

214

437

ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF
STOLEN PROPERTY IN THE SECOND DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between October
1 , 1 994 and September 10,1 995. in the County of Queens and elsewhere, with intent to benefit themselves
or a person other than an owner thereof or to impede the recovery by an owner thereof, knowingly
possessed stolen property whose value exceeded fifty thousand dollars
ONE HUNDRED-NINETEENTH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE. MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF
STOLEN PROPERTY IN THE FOURTH DEGREE, committed as foltows:

The defendants, acting in concert with each other and others, on or about and between July 7,
1995 and Septennber 10. 1995. in the County of Queens and elsewhere, with intent to benefit themselves
or a person other ttian an owner thereof or to impede the recovery by an owner thereof, knowingly
possessed stolen property, to wit a credit card or debit card.

ONE HUNDRED-TWENTIETH COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMIIML POSSESSION OF
STOLEN PROPERTY IN THE FOURTH DEGREE, committed as foltows:

The defendants, acting in concert with each other and others, on or about and between August
3. 1995 and September 10. 1995. in the County of Queens and elsewhere, with Intent to benefit themselves
or a person other tfian an owner thereof or to impede the recovery by an owner thereof, knowingly
possessed stolen property, to wit a credit card or debit card.

ONE HUNDRED TWENTY-FIRST COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA

115

438

GODWIN ADEKANBI, PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF
STOLEN PROPERTY IN THE FOURTH DEGREE, committed as follows;

The defendants, acting in concert with each other and others, on or about and between August
3, 1995 and September 10, l995,intheCountyof Queens and elsewhere, with intent to benefit themselves
or a person other than an owner thereof or to impede the recovery by an owner thereof, knowingly
possessed stolen property, to wit: a credit card or debit card.

ONE HUNDRED TWENTY-SECOND COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF
STOLEN PROPERTY IN THE FOURTH DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between July 7,
1995 and September 10, 1995. in the County of Queens and elsewhere, with intent to benefit themselves
or a person other ttwn an owner thereof or to iftipede the recovery by an owner thereof, knowingly
possessed stolen property, to wit: a credit card or debit card.

ONE HUNDRED TWENTY-THIRD COUNT

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MICHAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF
STOLEN PROPERTY IN THE FOURTH DEGREE, committed as foltows:

The defendants, acting in concert with each other and others, on or about and between June 29,
1995 and September 10. 1995, in the County of Queens and elsewhere, with intent to benefit themselves
or a person other than an owner thereof or to impede the recovery by cm owner thereof, knowingly
possessed stolen property, to wit: a aedit card or debit card.

ONE HUNDRED TWENTY-FOURTH COUNT

116

439

The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN AOEKANBI. PRINCE DELE OSIBOTE. ROTIMI OGUNNUSI. MICHAEL ATAMOLOGUN. SAMUEL
ADEWALE, MARY OYETUGA, OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF
STOLEN PROPERTY IN THE FOURTH DEGREE, committed as follows:

The defendants, acting in concert with each other and others, on or about and between July 5,
1995 and September 10, 1995, in the County of Queens and elsewhere, with intent to benefit thenruelves
or a person other than an owner thereof or to impede the recovery by an owner thereof, knowingly
possessed stolen property, to wit: a credit card or debit card.

ONE HUNDRED TWENTY-FIFTH COUNT
The Grand Jury of the County of Queens, by this Indictment, accuses the defendants OLUSHINA
GODWIN ADEKANBI. PRINCE DELE OSIBOTE, ROTIMI OGUNNUSI, MIChlAEL ATAMOLOGUN, SAMUEL
ADEWALE, MARY OYETUGA. OLANREWAJU ADEYEMI of the crime of CRIMINAL POSSESSION OF
STOLEN PROPERTY IN TH